With No Bad News and a Positive Note, ICN Biomedicals Stock Plummeted 24%
ICN Biomedicals Inc.’s stock fell 24% in 4 trading days--a drop that the company could not explain but that investment analysts attributed to various factors, including a general weakening of medical company stocks.
The share price of the Costa Mesa firm that manufactures bio-technology research and medical diagnostic products fell sharply from $13 at the close of trading Nov. 3 to $10.125 at last Wednesday’s close.
The stock regained some of its value on Thursday, rising to $11, and closed on Friday at $10.875.
The drop earlier in the week occurred despite apparently positive news, released by the company on Monday, that it has received authorization from the U.S. Food and Drug Administration to market a new clinical diagnostic tool for detecting marijuana and cocaine in urine samples.
Jack Sholl, spokesman for ICN Biomedicals and its parent company, ICN Pharmaceuticals Inc., said he could not account for the stock price activity. He denied that there was any bad news pending that could account for the tumble in the stock price.
However, Alan Lancz, who owns Alan B. Lancz & Associates in Toledo, Ohio, and recommends ICN Biomedicals stock to clients of his money-managing firm, said he believes that the stock price tumble is a delayed response to Wall Street’s concerns about a federal grand jury investigation into ICN Pharmaceuticals’ promotion of a drug for AIDS treatment.
Lancz said the grand jury investigation will ultimately have no effect on ICN Biomedicals because it involves a drug that is being developed by another ICN subsidiary.
Lancz added that he believes that the selling of ICN Biomedicals stock is “a short-term phenomenon” and that “eventually the fundamentals will take control.” More important, he said, the company is doing well and reporting increased profits.
Another analyst, Jeff Kilpatrick, president of Newport Securities, a Costa Mesa-based brokerage firm, said ICN’s most recent new-product announcement may have disappointed some stock brokers who were expecting the company to report a more important breakthrough.
Kilpatrick observed that ICN Biomedicals’ stock has experienced a number of breathtaking rises and falls over the years, which he said is not unusual for high-tech biomedical companies.
“Every time they have an announcement of a product or a potential product, their stock runs up and down,” he said.
Steve Reid, director of research for Los Angeles-based Wedbush Securities Inc., said ICN’s stock is volatile in part because it is thinly traded, with only about 1.3 million shares held by the public. Therefore, the effect of every sale is magnified, he said.
Reid said that the market for all kinds of medical stocks “stinks” and that ICN’s price drop mirrors that trend.
Another local example of the deterioration in the health care market was the recent collapse of Medstone International Inc.’s share price. In the past week, Medstone’s stock dropped from $26 to $21.75, prompting the chairman of the Costa Mesa company to issue a statement Friday saying that he knew of no “fundamental reason” for the decline.
Reid said the drop in ICN’s stock price triggered further sales as brokerages automatically liquidated client shares at previously agreed price levels.
Nonetheless, Reid said Wedbush Securities Inc., which controls 500,000 shares of ICN Biomedicals, is recommending that its clients continue to invest in the company.
Recently, ICN Biomedicals reported third-quarter earnings of $1.5 million, which was 59% over $936,000 for the same period last year.
Times staff writer Eric Schine contributed to this report.
