O.C. Drug Maker ICN Agrees on Settlement
ICN Pharmaceuticals Inc. said Thursday that it has agreed to pay $15 million to settle a lawsuit that accused its chairman of insider trading and the company of misleading investors about its prize drug, Virazole.
The Costa Mesa drug maker and its chairman, Milan Panic, will pay about $12 million to end the 2-year-old lawsuit and the company’s insurer will pay the rest, according to two individuals familiar with the terms.
“Early settlement, which was recommended by our investment bankers, will avoid further litigation costs,” Panic said in prepared remarks.
Panic and other corporate executives weren’t available for further comment.
“We consider this to be an excellent settlement for the class,” said plaintiffs’ lawyer Alan Schulman of San Diego.
The settlement is the second major payoff in a class-action suit against ICN within the last 12 months, and it clears the company’s docket of active class-action cases.
ICN and Panic, however, still face lawsuits over his alleged sexual harassment of employees.
In October, the company paid $14.5 million in cash and stock to settle a 9-year-old shareholder lawsuit that had accused it of overly hyping Virazole, which federal officials at that time had rejected as a treatment for AIDS.
After failing to get its antiviral drug approved for AIDS treatment, ICN began working to obtain Food and Drug Administration approval for using Virazole as a treatment for the contagious liver disease hepatitis C.
The FDA rejected that effort too. But in the process, Panic sold $1.24 million worth of his ICN stock in late November 1994, more than two months before the company disclosed publicly that federal regulators weren’t going to approve Virazole for treating hepatitis C.
When the company disclosed the FDA’s decision in February 1995, Schulman filed suit, bringing to light Panic’s trades. The uproar over both the FDA rejection and Panic’s trading activities sent ICN’s stock value plummeting 36% and triggered demands for his ouster.
In its release, the company said the settlement would be taken as a charge against its second-quarter earnings, which are yet to be reported. The company said that even with the charge, it expected quarterly earnings to be “within analysts’ expectations,” which range from 47 cents to 60 cents a share.
The company did not include settlement information in an amended annual report filed Thursday with the Securities and Exchange Commission. But the document stated that the company and Panic remain targets of a federal criminal investigation and an SEC investigation.
ICN released news of the settlement after the market closed Thursday. Its stock gained $2 a share to close at $33.31 on the New York Stock Exchange. During trading, it reached a 12-month high of $33.38 a share.
The higher prices reflect the company’s other news Thursday that it was selected by the Polish government to conduct final negotiations for acquisition of a state-owned pharmaceutical company that manufactures finished products. The company also said this week that it plans to buy two more Russian drug factories and a Czech plant. It already owns one plant in Russia.
ICN has used its considerable foreign markets to promote Virazole as a treatment for many viral ailments, even though few drugs work even slightly in treating viral diseases.
Panic has promoted the drug, the generic name of which is ribavirin, as a treatment for a wide variety of viral ailments, including chicken pox, measles, herpes, influenza and a few tropical diseases.
In the United States, though, the company has approval to use Virazole only in treating a rare respiratory condition that affects children. Panic ran into major confrontations with the FDA in his efforts to use the drug as a treatment for AIDS and hepatitis C.
The company, though, is still testing Virazole in combination with other drugs produced by other companies.
Even so, detractors now refer to Virazole as a drug in search of an illness.
