ICN May Acquire Rest of Yugoslavia Unit

ICN Pharmaceuticals Inc., Eastern Europe’s largest drug maker, said Wednesday that it may acquire the 25% of its Yugoslavian unit that it doesn’t already own through negotiations with the Belgrade government over millions of dollars in unpaid debt.

Earlier this year, ICN said the Yugoslav government defaulted on $39 million in notes payable for drugs and supplies sold to state medical institutions. The company stopped selling to the government and said it would take a $172-million charge to cover all the money owed by cash-strapped Yugoslavia.

ICN said the government had taken control of a 25% stake in ICN from an employee-controlled group. The government had given the employee group the minority stake in 1991, when Costa Mesa-based ICN bought 75% of the Yugoslav drug maker.

“The move could lead to a favorable resolution of the Yugoslavian government’s outstanding debt with ICN, with the government offering its ownership interest as part of a settlement,” ICN spokesman Terry Souers said. “ICN would welcome such an outcome.”

Souers said it’s too early to discuss the terms of such an agreement. He declined to say how much debt ICN might forgive or whether the exchange would involve the entire 25% stake held by the government.

“ICN has been trying to get the rest of the company for as long as it has owned it,” said Eugene Melnitchenko, an analyst with Sutro & Co. “This may expedite things.”

To be sure, ICN Yugoslavia is struggling amid the country’s economic and political turmoil.

The unit, which accounts for about a third of the parent company’s overall sales, plans to fire 1,200 of its 3,500 workers by the end of March.

Analysts said ICN is looking to acquire the 25% stake now amid hopes it will generate significant profits after order is restored in the country, which is made up of the republics of Serbia, Montenegro and Kosovo.

“ICN has a 60% market share in the Balkans. Hopefully as the situation stabilizes, they would be a dominant player in that market,” said Melnitchenko, who has a “buy” recommendation on ICN shares.

Melnitchenko and other analysts said that between the unrest in Yugoslavia and economic turmoil in other parts of Eastern Europe, it’s hard to say when the region will make a significant contribution to the company’s profit again.

This year, the Yugoslav dinar devaluation stalled payments inside Yugoslavia while the plunge of the Russian ruble curbed demand in its main export market.

ICN’s stock rose $1.25 to $19.13 Wednesday. In May, the shares had traded as high as $52.25.