ICN Directors OK Hiking Firm’s Stake in Viratek to 73%
ICN Pharmaceuticals Inc. of Costa Mesa said Tuesday that its board of directors has approved the purchase of up to 1 million additional shares of stock in its partially owned subsidiary Viratek--a move that would increase ICN’s stake in the smaller company to 73%.
The decision was revealed just days after ICN Chairman Milan Panic met with Food and Drug Administration Commissioner Dr. Frank Young about the future of Viratek’s controversial drug, ribavirin, as a treatment for AIDS. So far, the FDA has refused to approve expanded testing of the drug, claiming that initial trials on homosexual men with early-stage AIDS symptoms failed to prove that the drug had any effect.
ICN Chief Operating Officer Lawrence Panitz said ICN wants the Viratek shares only as an investment. Viratek shares, which traded as high as $98 each a year ago, closed Tuesday in over-the-counter trading at $15, up 25 cents for the day.
“We think it’s in the best interest of the shareholders to invest at these prices,” Panitz said.
Stock analysts regularly following ICN agreed that the Viratek repurchase represents a sound investment but noted that there were additional reasons for the ICN move on Viratek.
Eugene Melnitchenko of Eppler Guerin & Turner Inc., investment bankers in Dallas, said he viewed the repurchase as an attempt by ICN to “put the squeeze on the short sellers,” the stock speculators who have sold Viratek shares.
Short sellers hope to turn a profit by borrowing shares, selling them and then later repaying the borrowed shares with ones purchased at a lower price. ICN’s purchase could raise the market price of Viratek shares and force the short sellers to cover their positions at a higher price.
900,000 Shares Sold Short
According to Melnitchenko, who follows ICN and Viratek closely, about 900,000 Viratek shares have been sold short.
The latest Viratek stock purchase authorization represents the third time ICN’s board has agreed to buy back shares of the subsidiary it once owned in its entirety. Within the last six months ICN has bought 1.5 million Viratek shares, gradually increasing its stake from 45% to its current 60% level. When the latest purchase is complete, ICN will own about 5.8 million of the nearly 8 million outstanding Viratek shares.
In an unrelated action Tuesday, Project Inform, a San Francisco AIDS drug information organization, said its leaders also met with FDA Commissioner Young last week and emerged hopeful that ribavirin will receive additional consideration by the FDA as an AIDS treatment.
“The inside story, as presented by FDA, isn’t as negative or hopeless as presented in the press or among some AIDS researchers,” said Project Inform co-founder Martin Delaney.
Delaney said he believes that the FDA remains “very interested” in future ribavirin testing and had assured Project Inform that the drug was by no means “dead in the water.”
