Disgruntled shareholders began to call for the resignation of the chairman of ICN Pharmaceuticals Inc. on Monday, saying that allegations of fraud and insider trading have rendered the company's founder incapable of leading ICN out of its latest crisis.
In a letter sent Monday to ICN's directors, Seth Glickenhaus asked the ICN board to fire Chairman Milan Panic. Glickenhaus is president of Glickenhaus & Co., a New York investment firm that holds nearly 900,000 ICN shares. Glickenhaus & Co.'s ICN stock holdings have lost more than $7.7 million in market value since Dec. 1.
"The images he has cast of himself and the company are deplorably bad," said Glickenhaus in the letter. "You, as directors would be guilty of serious dereliction of duty and financially quite vulnerable if you don't replace him immediately."
In a letter to ICN directors dated Saturday, shareholder Neal M. Goldstein argued against the board renewing Panic's employment contract, which reportedly expired last November. "No new agreement with Mr. Panic should even be discussed until . . . an investigation is completed," wrote Goldstein, a Santa Monica attorney.
Goldstein demanded that Panic take a leave of absence so the board can conduct an impartial investigation into the failed Virazole drug application and Panic's recent sale of ICN stock.
The Costa Mesa pharmaceutical company's latest controversy came to light last week when an angry shareholder filed a class-action lawsuit against ICN and Panic.
The suit alleges that ICN was notified Nov. 25 that its drug Virazole was rejected by the Food and Drug Administration as a treatment for hepatitis C, a highly contagious and potentially fatal liver disease, and that it did not make that information public until Feb. 17. Panic is accused of profiting from the information by selling a portion of his ICN stock in the months between his being notified of the government's rejection and the company's release of the information to shareholders.
On Nov. 28 and 29, Panic sold a total of 55,000 shares of ICN stock valued at $1.24 million. Panic sold his stock at $22.50 a share, but since that time the price has fallen to new 52-week lows, closing Monday at $13.25 a share.
In the past week, four additional shareholder lawsuits have been filed against ICN and Panic, according to New York lawyer Richard Speirs, who filed the first suit on behalf of investor Barbara L. Yates.
ICN would not comment Monday on the lawsuits or Panic's stock sale and has refused, as has the FDA, to make public the Nov. 25 federal rejection letter. On Friday, Panic said in a prepared statement that he would set up a committee made up of outside directors to investigate these latest developments.
Not just stockholders are losing confidence in Panic. By Monday, three of the company's 15 outside directors had resigned, according to investors.
ICN spokesman David Calef refused to comment on reports that Vernon Knight, the Baylor University professor who helped develop Virazole for use as a respiratory drug, and James Miscoll, a former vice chairman of Bank of America, had handed in their resignations. On Monday, sources familiar with ICN operations said a third director, Los Angeles investor Stephen D. Moses, had also resigned.
Reached by telephone, Moses said Monday that he and the other directors had been asked to refer all calls from the media to spokesman Calef. He declined further comment.
"What's happened has destroyed Mr. Panic's credibility, not only with investors but with Wall Street," said Jack Hicks, a Lufkin, Tex., investor. "This is a wonderful company, but it needs somebody at the helm that Wall Street will respect. I don't think they'll ever believe Mr. Panic again."
Several analysts suggest that Panic's future at ICN is in jeopardy.
"This raises the interesting question of whether (ICN's) board is going to do its job," said Jim McCamant, editor of the Medical Technology Stock Letter in Berkeley. "This is the moment of truth. Assuming that the facts are roughly as alleged, if the board doesn't change CEOs, then they've failed to do their job."
Edward Froelich, an analyst for a division of investment bank Donaldson, Lufkin & Jenrette, agreed that removing Panic, even temporarily, is the company's best option for repairing its damaged relationship with Wall Street.
"His is a difficult position to defend because it seems to me the timing of the sale was inappropriate," said Froelich. "If they got a well-known pharmaceutical leader to come in and run things I think it would allay stockholder trepidation."
Two mutual fund managers said they believe the company's troubles may lead to the eventual sale of ICN to a larger pharmaceutical concern.
"That might be a blessing for shareholders who hang in there if it gets sold for a nice price," said one fund manager who asked not to be identified. "If you get a good takeover price, it would make the lawsuits moot."