ICN Chief Calls for Review of Stock Sales : Finance: Chairman’s trading of shares is the subject of a shareholder suit. He asks Costa Mesa firm’s board to investigate.
The chairman of ICN Pharmaceuticals Inc., pressed by the company’s fast-falling stock price and the disclosure of his own questionable stock deals, said Friday that he wants the ICN board to set up a committee “as soon as possible” to investigate the latest developments.
Milan Panic, in prepared remarks, said he wants a group of the company’s outside directors to review the timing of stock trades he and other executives have made as well as the disclosure of letters by federal regulators about their refusal to approve the drug Virazole as a treatment for hepatitis C.
ICN’s stock dropped an additional 10%, or $1.625 a share, Friday in heavy New York Stock Exchange trading, to close at $14.375 a share--its lowest price in the past 12 months. About 1.1 million shares changed hands, more than four times its recent daily average.
Since Feb. 17, when the company revealed its problems with getting Virazole approved, its stock value has plummeted 36%--from $22.675 a share.
The company said then that the U.S. Food and Drug Administration wouldn’t approve Virazole to treat hepatitis C, a highly contagious and potentially fatal liver disease that afflicts about 150,000 Americans annually. The FDA also directed the company to discontinue additional studies, noting that the company’s idea of combining Virazole with interferon was a “relatively problematic” procedure in treating hepatitis C.
Panic and a corporate spokesman, David Calef, would not comment Friday beyond the brief press release on the chairman’s call for a special committee. ICN has 17 directors, only two of whom are officers in the company.
On Tuesday, a lawyer for a shareholder filed a class action lawsuit alleging that Panic and ICN withheld information about the FDA’s comments for nearly three months and that Panic, in the interim, sold nearly 19% of his ICN stock for $1.24 million.
The lawyer, Alan Schulman of San Diego, called Panic’s trades “a clear-cut case of insider trading.” The suit alleges that Panic sold 55,000 shares on Nov. 29-30 after learning from the FDA that Virazole wouldn’t be approved but nearly three months before releasing that information publicly.
“I was astonished (Panic) did that,” said analyst David Lugg, a director at Standard & Poor’s rating service. “The timing stinks.”
The company, however, did say in early December that the FDA had asked it to resubmit its application for the drug, news that caused ICN’s stock to dip $2.875 a share, then to $19.125 a share. And Panic, in a Securities and Exchange Commission filing then, said he planned to sell 100,000 shares altogether. Before his November sales, Panic owned 295,611 shares.
Two other executives also sold shares before the FDA comments were released. Executive Vice President Bill MacDonald sold 2,004 shares for $18.50 a share on Jan. 25, and Vice President Todd Joyce sold 661 shares for $19 a share on Jan. 9.
The shareholder suit seeks to recoup losses for those who purchased stock between Nov. 29, when the stock was worth nearly $22 a share, and Feb. 17, when it closed at $17.375 a share.
ICN, which is continuing with tests in Mexico combining Virazole with interferon to treat hepatitis C, has butted heads with the FDA previously in its effort to introduce its drug in the United States.
In the late 1980s, ICN waged a contentious battle with the federal agency in its effort to get Virazole approved as an AIDS treatment. The FDA refused to permit it. A few foreign countries later approved its use for treating AIDS.
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Times correspondent Hope Hamashige and Bloomberg Business News contributed to this report.
