Icagen Reports Fourth Quarter and Full Year 2005 Financial Results

P. Kay Wagoner, Ph.D., Chief Executive Officer, noted, "2005 was ayear of significant achievements for Icagen. During the year, weinitiated the ASSERT study, the largest study of a potential new drugconducted for patients with sickle cell disease since the landmarkMulticenter Study of Hydroxyurea conducted in the mid-1990's. Thispivotal Phase III clinical trial of ICA-17043, representing the firstnovel pharmaceutical initially developed for the chronic oraltreatment of sickle cell disease in late stage development, is nowwell underway. In addition, during 2005 the Company executed aninitial public offering despite challenging conditions in the equitycapital markets, raising the funds necessary to drive the continuedprogress of this important program, while also advancing the Company'searlier stage pipeline. As we begin 2006, we are excited about thecoming year, particularly with regard to the continued progress of oursickle cell disease program, as well as the continued development ofour other programs, including our novel approach to epilepsy andneuropathic pain, all based upon our core ion channel technologyplatform."

Pipeline Update

ICA-17043 for Sickle Cell Disease

-- During the fourth quarter of 2005, the Company continued patient and site enrollment in its pivotal Phase III clinical trial of ICA-17043. ICA-17043 has both orphan drug designation and fast-track status. This trial is designed to be a randomized, double-blind, placebo-controlled study in 300 patients. The primary endpoint for this study is vaso-occlusive crisis rate in the ICA-17043 arm versus vaso-occlusive crisis rate in the placebo arm. The Company is conducting the study at approximately 65 sites across the U.S. and in selected other countries. The study design includes an interim efficacy analysis by an independent data monitoring committee ("DMC"). The Company's target timeframe for the completion of patient enrollment in this trial is the second half of 2006.

-- In January 2006, the Company reported that following the first per protocol interim safety review, the DMC recommended continuation of the pivotal Phase III clinical trial of ICA-17043 for the treatment of sickle cell disease as planned. The DMC meets approximately every six months to review unblinded safety data from the pivotal Phase III clinical trial.

-- The Company continues preparations for two additional clinical trials for ICA-17043 in the treatment of sickle cell disease. The first of these studies, expected to begin in the first half of 2006, will involve pediatric patients and will be primarily focused on the safety and pharmacokinetics of ICA-17043 in the pediatric population. The second of these studies, expected to begin in the second half of 2006, will involve sickle cell disease patients who have secondary pulmonary hypertension, a common and serious complication of this illness.

Other Clinical and Preclinical Programs

-- Development continued on the Company's internal preclinical program in epilepsy and neuropathic pain, as well as the Company's research programs in pain, inflammation and glaucoma.

-- During the fourth quarter, the Company provided an update on the Company's atrial fibrillation program, currently in Phase I clinical trials in collaboration with Bristol-Myers Squibb Company ("BMS"). BMS has been conducting the clinical development of this program. Most recently this clinical development has included a Phase I proof-of-concept study, which was initiated in 2004. As previously reported, as a result of slow enrollment into this proof-of-concept study, BMS has decided to discontinue this specific clinical trial. BMS is currently considering alternative trial designs.

-- The Company's collaboration with Astellas Pharma, Inc. ("Astellas"), the research phase of which was completed during 2003, allows for the selection of compounds generated by the collaboration by Astellas for certain specified indications and by Icagen for certain other specified indications. During the fourth quarter of 2004, Astellas had selected a compound with potential utility in the treatment of dementia, including Alzheimer's disease, for advanced preclinical studies. Astellas recently decided not to continue the development of this particular compound, but continues to evaluate other compounds generated by the collaboration for potential further development. In addition, Icagen is currently evaluating certain other compounds with potential utility in the treatment of other central nervous system disorders, including attention deficit/hyperactivity disorder ("ADHD").

Other Developments

-- During the fourth quarter, the Company announced the expansion of its management team with the addition of Gregory Shotzberger, Ph.D., as Vice President of Business Development. Dr. Shotzberger brings to Icagen broad experience in business development within the pharmaceutical industry spanning a twenty year period, including heading business development at King Pharmaceuticals, as well as senior level business development positions at AstraZeneca and DuPont.

-- Also during the fourth quarter, Icagen was recognized as the Healthcare/Pharmaceutical Company of the Year by the North Carolina Technology Association (NCTA).

Richard D. Katz, M.D., Chief Financial Officer, noted, "The fourthquarter and full year results were consistent with our expectations inall material respects, and reflect our continued focus on conservativefinancial management while spending appropriately to fund thecontinued development of our clinical and preclinical programs."

Financials

Revenues for the fourth quarter of 2005 totaled $2.7 million, ascompared to $2.9 million during the same period in 2004, a decrease of7%. The decrease in revenues for the fourth quarter of 2005, ascompared to the same period in 2004, was primarily due to therecognition of a milestone payment from Astellas during the fourthquarter of 2004 and decreased revenues from the Company'scollaboration with Abbott Laboratories, partially offset by increasedcost sharing reimbursement from the Company's collaboration withMcNeil Consumer & Specialty Pharmaceuticals ("McNeil") for the furtherclinical development of ICA-17043.

Operating expenses for the fourth quarter of 2005 were $8.4million, as compared to $7.5 million for the same period in 2004, anincrease of 12%. The increase in operating expenses for the fourthquarter of 2005, as compared to the same period in 2004, was primarilydue to increased research and development expenses related to thedevelopment of ICA-17043. In addition, general and administrativeexpenses increased, primarily as a result of expenses associated withoperating as a public company.

Net loss for the fourth quarter of 2005 was $5.3 million, ascompared to $4.5 million for the same period in 2004, an increase of18%, due primarily to higher research and development expenses andgeneral and administrative expenses and a decrease in revenues.

Revenues for 2005 totaled $8.8 million, as compared to $6.5million in 2004, an increase of 35%. The increase in revenues for2005, as compared to 2004, was primarily due to increased revenuesfrom the Company's collaboration with McNeil for the further clinicaldevelopment of ICA-17043, offset in part by decreased revenues fromthe Company's collaboration with Abbott and the recognition of amilestone payment from Astellas in 2004.

Operating expenses for 2005 were $30.5 million, as compared to$23.4 million for 2004, an increase of 30%. The increase in operatingexpenses for 2005, as compared to 2004, was primarily due to increasedresearch and development expenses related to the development ofICA-17043. In addition, general and administrative expenses increased,primarily as a result of expenses associated with operating as apublic company.

Net loss for 2005 was $20.2 million, as compared to $16.7 millionfor 2004, an increase of 21%, due primarily to higher research anddevelopment expenses and general and administrative expenses, offsetin part by an increase in revenues.

Financial Guidance

During 2006, the Company expects revenues to be in the range of $7to $9 million. The revenue guidance is based upon expected revenuesfrom the Company's collaboration with McNeil, and does not include anyadditional revenues from potential new partnerships. Research anddevelopment expense during 2006 is expected to be in the range of $30to $34 million. Research and development expense is expected to bedriven largely by expenditures related to the Company's sickle celldisease program, including the pivotal Phase III ASSERT study, theinitiation of the pediatric program and the initiation of a study insickle cell disease patients with secondary pulmonary hypertension;the Company's program in epilepsy and neuropathic pain; and theCompany's earlier stage research programs. General and administrativeexpense during 2006 is expected to be in the range of $5 to $6million. During 2006, the Company expects the operating loss to be inthe range of $27 to $31 million.

The guidance provided above includes the effect of stock-basedcompensation expense in accordance with the adoption of Statement ofFinancial Accounting Standards No. 123 (revised 2004), Share-BasedPayment ("SFAS No. 123R") as of January 1, 2006. For 2006, the Companyexpects stock-based compensation expense to be approximately $2million.

Conference Call

Icagen will host a conference call to discuss these results todayat 10:00 a.m. ET.

To listen to the conference call, please dial:

-- 800-683-1585 (United States and Canada)

-- 973-935-2107 (International)

Please reference reservation number 7061997.

A webcast of this conference can be accessed athttp://w.on24.com/events/20522. The webcast will be archived for 90days.

A playback of the call will be available from approximately 1:00p.m. ET on March 1 through March 8, 2006 and may be accessed bydialing:

-- 877-519-4471 (United States and Canada)

-- 973-341-3080 (International)

Please reference reservation number 7061997.

About Icagen

Icagen, Inc. is a biopharmaceutical company based in ResearchTriangle Park, North Carolina, focused on the discovery, developmentand commercialization of novel orally-administered small moleculedrugs that modulate ion channel targets. Utilizing its proprietaryknow-how and integrated scientific and drug development capabilities,Icagen has identified multiple drug candidates that modulate ionchannels. The Company's four most advanced programs are:

-- ICA-17043 for sickle cell disease, for which the Company is conducting a pivotal Phase III clinical trial;

-- a compound for atrial fibrillation, which is being developed by the Company's collaborator BMS and for which an initial Phase I safety study has been completed;

-- lead compounds for epilepsy and neuropathic pain, for which the Company is conducting preclinical studies; and

-- lead compounds for dementia, including Alzheimer's disease, for which the Company's collaborator Astellas is conducting preclinical studies, and lead compounds for attention deficit/hyperactivity disorder ("ADHD)", which were derived from the collaboration and for which the Company is conducting preclinical studies.

Icagen is also conducting ongoing drug discovery programs focusedon new therapeutics for pain disorders, inflammatory disorders andglaucoma.

Forward Looking Statements

This press release contains forward-looking statements thatinvolve a number of risks and uncertainties. For this purpose, anystatements contained herein that are not statements of historical factmay be deemed to be forward-looking statements. Without limiting theforegoing, the words "believes," "anticipates," "plans," "expects,""intends," and similar expressions are intended to identifyforward-looking statements. Important factors that could cause actualresults to differ materially from the expectations described in theseforward-looking statements are set forth under the caption "CertainFactors That May Affect Future Results" in the Company's most recentQuarterly Report on Form 10-Q, filed with the Securities and ExchangeCommission on November 7, 2005. These risk factors include risks as towhether the Company's products will advance in the clinical trialsprocess, the timing of such clinical trials, whether the resultsobtained in preliminary studies will be indicative of results obtainedin clinical trials, whether the clinical trial results will warrantcontinued product development, whether and when, if at all, theCompany's products, including ICA-17043, will receive approval fromthe U.S. Food and Drug Administration or equivalent regulatoryagencies, and for which indications, and if such products receiveapproval, whether they will be successfully marketed; the Company'shistory of net losses and how long the Company will be able to operateon its existing capital resources; and the Company's dependence onthird parties, including manufacturers, suppliers and collaborators.We disclaim any intention or obligation to update any forward-lookingstatements as a result of developments occurring after the date ofthis press release.
Icagen, Inc.
Condensed Statements of Operations

(in thousands, except share and per share data)
(Unaudited)

Three Months Ended Year Ended
December 31, December 31,
----------------------- -----------------------
2005 2004 2005 2004
----------- ----------- ----------- -----------
Collaborative research
and development revenues:
Research and
development fees $1,136 $1,706 $4,454 $4,643
Reimbursed research
and development
costs 1,583 1,206 4,340 1,851
----------- ----------- ----------- -----------
Total collaborative
research and
development revenues 2,719 2,912 8,794 6,494

Operating expenses:
Research and
development 7,182 6,485 25,906 20,390
General and
administrative 1,257 1,027 4,589 3,041
----------- ----------- ----------- -----------
Total operating expenses 8,439 7,512 30,495 23,431
----------- ----------- ----------- -----------
Loss from operations (5,720) (4,600) (21,701) (16,937)
Other income, net 427 109 1,452 214
----------- ----------- ----------- -----------
Net loss $(5,293) $(4,491) $(20,249) $(16,723)
=========== =========== =========== ===========

Net loss per share -
basic and diluted $(0.24) $(2.77) $(1.03) $(10.61)
=========== =========== =========== ===========

Weighted average common
shares outstanding -
basic and diluted 21,935,552 1,623,433 19,636,848 1,575,923
=========== =========== =========== ===========

Pro forma net loss per
share assuming conversion
of preferred stock -
basic and diluted $(0.27) $(0.96) $(1.03)
=========== =========== ===========

Pro forma weighted
average common shares
outstanding - basic
and diluted 16,383,641 21,201,188 16,313,161
=========== =========== ===========


Unaudited pro forma basic and diluted net loss per share is computed
using the weighted average number of common shares outstanding,
including the pro forma effects of the automatic conversion of all
outstanding preferred stock into shares of the Company's common stock
effective upon the completion of the Company's initial public offering
as if such conversion had occurred at the date of the original
issuance. The following table sets forth the computation of unaudited
basic and diluted, and unaudited pro forma basic and diluted, net loss
per share.


Icagen, Inc.

Reconciliation of Historical and Proforma Results

(in thousands, except share and per share data)
(Unaudited)

Three Months Ended Year Ended
December 31, December 31,
------------------------------------------------
2005 2004 2005 2004
------------ ----------- ----------- -----------
Historical:
Numerator:
Net loss $(5,293) $(4,491) $(20,249) $(16,723)
============ =========== =========== ===========

Denominator:
Weighted-average
common shares
outstanding - basic
and diluted 21,935,552 1,623,433 19,636,848 1,575,923
============ =========== =========== ===========

Net loss per share -
basic and diluted $(0.24) $(2.77) $(1.03) $(10.61)
============ =========== =========== ===========

Pro Forma:
Numerator:
Net loss, as reported $(5,293) $(4,491) $(20,249) $(16,723)
============ =========== =========== ===========

Denominator:
Shares used above 21,935,552 1,623,433 19,636,848 1,575,923

Pro forma adjustments
to reflect assumed
conversion of
preferred stock, on
a weighted-average
basis 14,760,208 1,564,340 14,737,238
----------- ----------- -----------

Shares used to
compute pro forma
basic and diluted
net loss per share 16,383,641 21,201,188 16,313,161
=========== =========== ===========

Pro forma net loss per
share - basic and
diluted $(0.27) $(0.96) $(1.03)
=========== =========== ===========


Icagen, Inc.
Condensed Balance Sheets

(in thousands)
(Unaudited)

December 31, December 31,
2005 2004
------------- -------------
Assets
Cash and cash equivalents $47,763 $30,217
Other current assets 1,328 3,210
Property and equipment, net 2,130 1,906
Technology licenses and related costs, net 2,368 2,506
Other long-term assets 804 298
------------- -------------
Total assets $54,393 $38,137
============= =============

Liabilities and stockholders' equity
Current liabilities $6,697 $6,671
Deferred revenue, less current portion 12,510 13,507
Equipment debt financing, less current
portion 1,194 732
Stockholders' equity 33,992 17,227
------------- -------------
Total liabilities and stockholders' equity $54,393 $38,137
============= =============