Tumble in ICN’s Stock Price Tied to Press Reports
After soaring for nearly two weeks, the price of common stock in ICN Pharmaceuticals and its subsidiaries plummeted in heavy trading Monday on Wall Street, spurred in part by press reports questioning the effectiveness of its mainstay product, the antiviral drug Virazole.
The stock price of the Costa Mesa drug maker fell $6.25 to $21.75 a share Monday on the New York Stock Exchange. The stock was the second most active on the Big Board with more than 2.7 million shares traded.
ICN’s stock price--boosted largely by reports that Virazole was being tested as a potential treatment for acquired immune deficiency syndrome--had jumped nearly 67% between Aug. 12-21, when it began the downturn that turned into Monday’s steep decline.
Eugene Melnitchenko, an analyst with the Dallas-based brokerage of Rauscher Pierce Refsnes, said that last week’s price drop was caused largely by profit taking among investors. Monday’s plunge, however, was caused largely by negative press reports, said Melnitchenko.
An article in Friday’s Los Angeles Times quoted ICN Chairman Milan Panic as saying that there is as yet no proof that Virazole is effective against AIDS. The article also quoted an official of the Centers for Disease Control as questioning Virazole’s effectiveness as an influenza medication.
Columnists in the Monday editions of both the Wall Street Journal and Barron’s questioned the size of the market for an AIDS medication and ICN’s ability to compete in that market. The New York Times also featured ICN in an article Friday that questioned Virazole’s potential use in treating both influenza and AIDS.
Melnitchenko said he believes that Panic underplayed the potential of the drug in the interview with the Los Angeles Times--cautious because the Food and Drug Administration censured ICN in April for making false and misleading claims about Virazole.
Lawrence H. Panitz, ICN’s senior vice president and legal counsel, agreed that recent press coverage spurred Monday’s slide. Panic was not available for comment Monday.
The price of ICN’s subsidiaries also took a nose dive in active trading Monday. Viratek Inc., one of Monday’s most heavily traded over-the-counter stocks, plunged $14.50 to $21.75. The price of shares in SPI Inc., ICN’s other subsidiary, fell $6.75 to $26.25.
The three stocks began their surge skyward Aug. 12, when a glowing research report and “buy” recommendation was released by Paine Webber. But the brokerage circulated an update to clients Friday, downgrading the brokerage house’s “buy” recommendation to “attractive” because the stock price had risen to a level that reflected its earnings potential.
Paine Webber also said Ronald Nordmann, the drug analyst who wrote the initial research report, will be working with ICN in its quest to buy another drug concern and, during that time, won’t be researching the company. During the interim, analyst Dave Lothson will follow ICN’s stock, Paine Webber said. It was Lothson who issued the revised recommendation Friday.
A Paine Webber spokeswoman, who asked not to be identified, stressed that “it is not unusual” for an analyst to be taken off a stock while he works with the company’s investment banking concerns. She said Nordmann was not working with ICN when he released his initial research report. Neither analyst could be reached for comment Monday.
But Melnitchenko said investors, jittery after the drastic rise in the price of ICN stock, jumped ship at the first inkling that the shares might have become overvalued.
