Heartland Sees Trouble If Panic Stays With ICN

ICN Pharmaceuticals Inc.’s largest shareholder, Heartland Advisors, renewed calls for the resignation of the Costa Mesa drug maker’s controversial chairman and chief executive, Milan Panic.

Heartland fund manager Eric Miller said controversy over Panic, including recent moves by securities regulators to oust him from ICN, are dragging down the Costa Mesa company’s shares.

The Securities and Exchange Commission earlier this month charged Panic, the company and two current and former executives with fraudulently misleading investors about an unsuccessful attempt to win federal approval for a new drug. The SEC is seeking to bar Panic, who founded ICN, from working as an executive at a publicly held company.

Miller said that regardless of the merits of the SEC case, controversy over Panic has cast a shadow over ICN. The company’s shares are unchanged this year, even though its hepatitis C treatment ribavirin, which is marketed by Schering-Plough Corp., is expected to become a blockbuster.

“The company is very much undervalued,” Miller said in an interview. “We think much of that stems from the legal issues and clouds that seem to follow Milan.”

ICN shares closed Wednesday at $22.56, down 6 cents, on the New York Stock Exchange.

Miller said that the stock would trade between $30 and $40 if Panic weren’t running the company. He based that forecast on his estimate that royalties from ribavirin will help the company report 1999 earnings of $1.50 a share and 2000 earnings of $2.50.

Heartland has filed a proposal for vote by ICN shareholders at their annual meeting on Sept. 22 that would require all directors to retire at age 70. If it passes, Panic, 69, would leave office after his next term expires, Miller said.

ICN has yet to mail its proxy to shareholders. ICN spokesman Terry Souers said that’s likely to happen this week. Souers said he couldn’t say whether other shareholders have filed similar proposals.

ICN will urge shareholders to reject Heartland’s proposal as it did when the investor filed a similar motion last year, Souers said.

“Milan Panic founded and built this company. It has a bright future,” Souers said. “He has an excellent management team behind him. We’re looking forward to increasing shareholder value in the weeks, months and years to come.”

Heartland’s mandatory-age-limit proposal last year won only about 20% of the votes cast. This year it may have more support.

Relational Investors LLC bought 1.9 million ICN shares during the second quarter, according to filings with the SEC. Relational is an activist investor that shares in companies that it believes are poorly run and works to turn them around.

Relational Principal Ralph Whitworth is chairman of Apria Healthcare Group Inc., a Costa Mesa-based provider of home health care services that he helped make profitable after becoming its biggest shareholder, then reshuffling the board of directors and management team.

Whitworth couldn’t be reached to comment on Heartland’s proposal.