Stock Sale Ends ICN’s Hope of Acquiring Swiss Drug Firm

ICN Pharmaceuticals of Costa Mesa said Thursday that it has sold its 8.6% stake in F. Hoffmann-La Roche & Co., abandoning any hope of acquiring the giant Swiss pharmaceutical company because of opposition from Hoffmann family members.

ICN spokesman Jack Sholl said the company sold its 1,308 shares of Hoffmann-La Roche stock late Wednesday in a private transaction for $209 million.

While the company declined to say how much it made on the stock, market analysts estimated that ICN realized a profit of $25 million to $30 million on its Hoffmann-La Roche shares.

ICN announced the stock sale amid another round of adverse publicity involving ICN and its principal product, ribavirin.

The U.S. Justice Department on Thursday confirmed reports that the agency is looking into “unspecified concerns” raised by the Food and Drug Administration involving ICN.

Justice Department spokeswoman Amy Brown would not comment on an NBC news report earlier in the week that the department was asked to impanel a federal grand jury to investigate whether ICN officials should be charged with criminal misconduct.

The company denied any knowledge of a Justice Department inquiry about civil or criminal misconduct. Sholl said the NBC news report, which summarized previously reported problems involving the company and its efforts to market ribavirin as a treatment for AIDS, was “unfair and misleading.”

Last spring, ICN was criticized before a congressional committee for providing misleading information to federal officials about ribavirin’s effectiveness as an AIDS treatment, and the company also is the subject of a Securities and Exchange Commission investigation.

In purchasing Hoffmann-La Roche shares over the past seven months, ICN hinted that its objective was to take control of the company and thus acquire a national marketing and distribution network for ribavirin.

Ribavirin, ICN’s primary product, is an antiviral drug that is being clinically tested as an AIDS treatment. It also is used in the United States and abroad for treating respiratory diseases in infants and young children.

As ICN accumulated its position in Hoffmann-La Roche stock, many Wall Street analysts questioned whether ICN had the financial wherewithal to take control of the giant drug manufacturer or whether Hoffmann family members would be willing to sell their majority holding.

“In selling our major position in the company, we understand and respect Hoffmann-La Roche’s desire to remain in family control for the rest of the century,” ICN chairman Milan Panic said in a statement.

To try to seize control of the company in the face of such opposition, Sholl said, would run counter to ICN’s corporate policy. “The company has never done an unfriendly acquisition,” he said.

ICN said it will use the proceeds from the stock sale “to acquire all or a part of one or more health-care companies in order to expand (ICN’s) distribution capabilities, supplementing current product lines and adding compatible ones.” Sholl declined to elaborate.

Craig Dickson, an analyst who follows ICN for Interstate Securities in Charlotte, N.C., said ICN’s sale of its Hoffmann-La Roche stake may increase the company’s credibility in the eyes of the investment community.

Dickson said that although he believed that an ICN takeover of the Swiss company was feasible, the majority of analysts believed that “it was an absurd idea for ICN to take over a company as large as Hoffmann-La Roche.”

Dickson said his favorable assessment of ICN was buoyed by ICN’s announcement Thursday that the FDA has approved sale of its drug 8-MOP for use in treating a form of skin cancer called cutaneous T-cell lymphoma.

Sholl said the drug will be marketed by SPI Pharmaceuticals, an ICN subsidiary, and used in conjunction with a blood irradiation system developed and marketed by a unit of Johnson & Johnson.

Although the form of cancer for which 8-MOP is a treatment is relatively rare, occuring in only about 3,000 people a year in the United States, analyst Eugene Melnitchenko said worldwide sales of the drug eventually could reap profits for ICN of up to $30 million a year.

Melnitchenko, an analyst with Eppler, Guerin & Turner in Dallas, criticized the NBC report as “a character assassination of Milan Panic.”

But Mike Connor, senior vice president of the brokerage firm of Fahnestock & Co., said Panic has repeatedly made misleading statements.

“We are extremely skeptical of any announcements emanating from the company,” Connor said. “This guy (Panic) has a history time and again of making statements and conducting himself in a promotional way, and he has injured innocent investors.”

In January, 1987, Panic announced with much fanfare that early tests of ribavirin, marketed by ICN as Virazole, indicated that the drug might slow the onset of AIDS in people infected with the deadly virus.

The FDA subsequently questioned whether the tests had been properly conducted. In addition, because of concerns about the drug’s safety, the agency last April placed what officials called “a de facto clinical hold” on further human tests of the drug. The hold was lifted in October after the company furnished the FDA with more data. Other tests since have begun under the auspices of the National Institutes of Health.

Testimony presented at a congressional committee hearing last May indicated that the committee and the FDA also are investigating whether ICN illegally promoted and sought to sell ribavirin to doctors for the treatment of AIDS without receiving the FDA’s permission. In addition, ICN has said that the SEC is reviewing trading in the stock of ICN and a subsidiary, Viratek, from December, 1986, through February, 1987. The agency is trying to determine, among other things, whether false and misleading statements about the safety and efficacy of ribavirin have been made by ICN, Viratek or one of the company’s broker-dealers.

Sholl said ICN denies any wrongdoing and is cooperating with the federal agencies in their investigations.