Belgrade Trying to Seize Control of Drug Factory, ICN Officials Say

ICN Pharmaceuticals Inc. said Friday the Belgrade government is attempting to illegally wrest control of ICN’s troubled Yugoslav unit, the country’s biggest drug maker and biggest private employer.

The U.S. Embassy has lodged a complaint with the Yugoslav government’s Department of Foreign Ministry, the company said, and the U.S. State Department has been notified.

ICN Chief Executive Milan Panic called the Belgrade government’s seizure attempt “an irrational move” to stir up anti-American sentiment on the eve of U.S.-sponsored peace talks in Paris to end the 11-month Kosovo conflict among ethnic Albanians, Serb security forces and Yugoslav army troops.

The Yugoslav government issued a statement claiming majority control of the company, according to Costa Mesa-based ICN. But as of Friday afternoon, no court papers had been filed by the government and there had been no move to take the plant by force, company officials said.

The government’s reported plan to seize the plant is the latest in a series of setbacks for ICN in Eastern Europe. The plant was once a key source of revenue for the pharmaceutical company--it generated about a third of the company’s total revenue as recently as 1997.

But ICN has curtailed its operations sharply in the last year, as the Belgrade government stopped paying for drugs and currency devaluations sapped demand in its main markets.

The company has reduced its work force at the plant to about 2,000 employees. There are no U.S. workers at the plant.

“The impact will be more emotional than economic,” said Sergio Traversa, a Mehta Partners analyst with a “buy” recommendation on ICN shares. “Investors that hold ICN shares already know that the value is not in Yugoslavia.”

Traversa had forecast that ICN Yugoslavia’s business would account for about $23 million of the $211 million in operating profit he expects the company to report this year.

Company officials disputed those estimates on Friday, calling them “a little high.”

The plant manufactures a wide variety of pharmaceuticals including insulin, antibiotics and painkillers, including some brand-name drugs licensed for sale in Eastern Europe.

ICN’s troubles in Yugoslavia have been offset by strong sales of branded drugs in the U.S. and royalties from sales of Schering-Plough Corp.’s hepatitis C treatment Ribavirin, which is a combination of the ICN drug ribavirin and Schering’s Intron A.

Trading in ICN’s stock was halted early Friday, pending the ICN announcement. When trading resumed minutes before the markets closed, ICN’s shares slumped 11%, or $3, to end at $23.25.

ICN said a Yugoslav government agency determined that ICN owns 35% of ICN Yugoslavia, not the 75% that the company believes it purchased in 1991.

The Yugoslav government has named new directors and a managing director for the company, ICN said.

Government officials weren’t immediately available to discuss the ruling or explain its rationale.

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Bloomberg News was used in compiling this report.