Rise in Costs Fuels Quarter Decline for ICN Pharmaceuticals

ICN Pharmaceuticals Inc. of Costa Mesa cited costs associated with new acquisitions and with the marketing of a new anti-viral drug in reporting a sharp drop in net income for the fiscal fourth quarter and year, despite strong sales.

Profits for the three months ended Nov. 30 fell 97%, to $37,000 from $1.2 million in the same quarter a year ago. For all of fiscal 1984, ICN reported that net income declined 60%, to $871,000 from $13.5 million.

However, the multinational health care and drug company reported a 40% increase in fourth-quarter revenues, to $12.7 million from $9.1 million, while annual revenues were up 21%, to $44.8 million from $37 million.

The heavy drop in earnings is not a sign of long-term problems at ICN, said company spokesman Dominic E. Liuzzi. Rather, he said, it is due in large part to a sharp rise in marketing costs associated with the pending introduction of a new anti-viral drug, Virazole. The drug is nearing approval from the U.S Food and Drug Administration as a treatment for respirator syncytial virus, a deadly disease that attacks infants. It is also undergoing clinical testing as a treatment for influenza, genital herpes and other viruses, the company said in a statement.

“If the drug is approved, as we think it will,” Liuzzi said, “we think earnings will improve.”

Eugene Melnitchenko, vice president of the Dallas brokerage of Rauscher Pierce Refsnes Inc., seemed to agree with Liuzzi’s rosy outlook: “ICN is in an excellent financial position. They do have enough cash to finance the clinical testing and the marketing of the drug.”

In June, Eastman Kodak Co. paid $8.4 million for 5% of ICN’s common stock and 10% of Virateck Inc., an ICN subsidiary. And the drug company has an unused $20-million credit line from the Bank of America that could be used for acquisitions or working capital, Liuzzi said.

Costs associated with a vigorous program of acquisitions in 1984 was also to blame for ICN’s weak earnings, Liuzzi said. The company purchased Edler Pharmaceuticals of Bryan, Ohio, a maker of dermatological products. ICN also bought Grossman Laboratories of Mexico City, a former division of Revlon Inc. of New York.

In December, ICN paid $21.2 million in cash and stock to lease, with an option to buy, its new Costa Mesa headquarters building from Discovision Associates. Discovision, a joint venture between International Business Machines Corp. and MCA Inc., owns preferred stock in ICN that, if converted, would give Discovision 9% of ICN’s outstanding common stock.