Record Earnings and Pact With Schering Buoy ICN : Pharmaceuticals: Industry giant will direct clinical efforts to show Costa Mesa firm’s main drug works in combination to treat hepatitis C.
Shareholders of ICN Pharmaceuticals Inc. got good news for a change Monday as the drug company announced record quarterly earnings and a licensing deal with industry giant Schering-Plough Corp. that could put its prized drug, ribavirin, into wider use worldwide.
Under the agreement, Schering-Plough will direct clinical efforts to prove that ICN’s main drug, which goes by the brand name of Virazole, works with its own interferon drug to treat the highly contagious liver ailment hepatitis C. Schering also will seek regulatory approval for the combination treatment.
ICN, based in Costa Mesa, has failed previously to prove the efficacy of ribavirin as a sole treatment for hepatitis C and has had problems moving through the regulatory channels. The U.S. Food and Drug Administration also halted the company from pursuing combination testing.
Schering, based in Madison, N.J., will pay ICN a $23-million licensing fee and royalties. In addition, it will purchase up to $42 million worth of ICN stock in the future--if ribavirin obtains approval from regulators in the United States and elsewhere.
Separately, ICN reported that earnings for the second quarter more than doubled to $13.9 million, or 45 cents a share, from $5.2 million, or 24 cents a share, for last year’s second quarter. Sales grew 63% to nearly $129 million in the second three months this year from $79 million.
ICN shareholders greeted the announcements with relief.
“Obviously, we are delighted,” said Sharon Weeks, a spokeswoman for Heartland Value Fund, a Milwaukee investment fund that owns 4.8% of ICN. Seth Glickenhaus, a partner at Glickenhaus & Co. in New York, which holds a 1.6% stake, said he was “elated with the news.”
Shares of ICN common stock shot up 16% Monday on the two announcements. The price rose $2.75 a share to close at $19.625 a share on the New York Stock Exchange. Schering stock climbed 37.5 cents to close at $46.50 a share on the Big Board.
Analysts saw the licensing deal as a feather in ICN’s cap. Jim McCamant, editor of Medical Technology Stock Letter, said ICN is “a company which some people are skeptical about because of its history, and a relationship with a respected company like Schering is clearly positive.”
However, Schering isn’t likely to get too cozy with ICN any time soon, say observers. A Schering spokesman refused to comment on whether the licensing deal might lead to an eventual purchase of ICN.
ICN’s brightening prospects come on the heels of months of bad news. Last November, its controversial chairman, Milan Panic, sold 55,000 shares in the company for about $1.24 million after the firm had received a letter from the FDA indicating that ribavirin wouldn’t be approved by itself to treat hepatitis C.
But the company didn’t make the FDA’s decision public until mid-February. Once it did, the stock lost 42% of its value in six days of trading, falling to $13.25 a share.
Subsequently, the Securities and Exchange Commission and the FBI have opened investigations into the company’s actions. Shareholders also have filed a number of lawsuits alleging insider trading. Panic has denied any wrongdoing, and a committee of directors decided to take no action against him.
Preliminary studies suggest that ribavirin may have a future as a hepatitis C treatment if it is combined with interferon, which is why Schering agreed to become ICN’s partner. Schering already is a market leader in sales of interferon to treat hepatitis, though it believes a combination therapy could enhance treatment.
A Schering spokesman said the company wants to begin clinical trials of the combined drugs later this year in Europe and next year in the United States. It likely will be at least two years before ribavirin could be approved and marketed as a combination treatment domestically, analysts said.
Meanwhile, ICN officials attributed much of the company’s reported second-quarter sales increase to a beefed-up marketing effort in the United States, Mexico and Eastern Europe.
In the United States, the company’s selling expenses jumped to $11.7 million during the first six months this year, compared with $6.8 million for the same period last year, officials said. Also this year, it opened sales offices in Budapest, St. Petersburg and Moscow.
For the first six months, ICN’s earnings soared to $30.9 million, or $1.06 a share, compared with net income of $13.6 million, or 62 cents a share, for first half of last year. Revenue for the period rose 73% to $261 million this year from $151 million.
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ICN Reports Record Quarter
ICN Pharmaceuticals reported record second-quarter earnings of $13.9 million. That was more than double the earnings for 1994’s second quarter. Figures in millions of dollars, except per-share data:
2nd qtr 2nd qtr 6 months 6 months 1994 1995 1994 1995 Revenue $79.0 $128.7 $151.1 $261.0 Net income 5.2 13.9 14.0 30.9 Per share 0.24 0.45 0.62 1.06
Source: ICN Pharmaceuticals Inc.; Researched by JANICE L. JONES / Los Angeles Times
