ICN Biomedicals to Take Charge of $73 Million Against Earnings

After several years of crediting its 1989 purchase of a Virginia drug development company for growing revenue and profit, ICN Biomedicals on Thursday said it will take a $73-million charge against earnings in its fourth quarter, including the write-off of $35.5 million of goodwill associated with the acquisition of Flow Laboratories.

In addition to the goodwill, the charge includes the write-down or write-off of obsolete and slow-moving inventory, much of it acquired in the Flow purchase, ICN Biomedicals spokesman Paul Knopick said. The company will report its annual and fourth-quarter results by the end of the month, he said. The huge write-off is also expected to affect ICN Pharmaceuticals, which owns 86% of ICN Biomedicals.

Flow Laboratories was acquired in November, 1989, for $37.6 million in a cash and stock deal that ICN Biomedicals officials said would gain the Costa Mesa drug developer immediate access to major European markets. Flow, which was assimilated into ICN, had been a division of Flow General Inc. in McLean, Va.

At the time of the purchase, 77% of Flow Laboratories’ $100 million in annual sales was in foreign markets, while only 24% of ICN Biomedicals’ $50 million in yearly sales was overseas.

Flow Laboratories posted a loss of nearly $4 million the year ICN purchased it, but an ICN spokesman at the time said the purchase made sense because Flow’s foreign operations had been “consistently profitable.”

In its financial reports for 1989 and 1990, ICN Biomedicals attributed increased revenue and earnings largely to the effect of the Flow acquisition. ICN Biomedicals earned $6.2 million, or 57 cents a share, on sales of $61 million for 1989, and $8.8 million, or 80 cents a share, on sales of $131.3 million for 1990.

For 1991, the company had a loss of $13 million, or $1.09 a share, on sales of $96 million. It blamed the recession, costs of a restructuring and disappointing sales of several product lines for the loss and decline in sales.

Despite Thursday’s gloomy promise of even greater losses for 1992, ICN Biomedicals officials said the company’s core businesses remain strong.

“There have been a number of problems with Flow,” spokesman Jack Scholl said, “and the measures we announced today are intended to improve the prospects for ICN Biomedicals as a whole.”

ICN Biomedicals announced the write-off after the stock market had closed Thursday. Its shares appear to have been unaffected, rising 12.5 cents for the day to close at $3.63 a share on the American Stock Exchange.

ICN Pharmaceuticals’ stock, traded on the New York Stock Exchange, also rose Thursday, up 75 cents to close at $11.625 a share.