Belgrade Trying to Seize Plant, ICN Officials Say

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

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

ICN Chief Executive Milan Panic called the attempt to seize the Belgrade plant “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 between ethnic Albanians on one side and Serb security forces and the Yugoslav army on the other.

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 over the plant by force, company officials said.

The government’s 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, generating a third of the company’s revenues as recently as 1997.

But ICN has curtailed its operations sharply in the last year, as the 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 there.

“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.

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 United States 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 $23.25.

ICN said a Yugoslav government agency determined that ICN owns just 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 available to discuss the ruling or explain its rationale.

The state may be planning to take control of the plant because ICN has stopped supplying drugs to the government after it defaulted on loans made so it could buy the drugs.

“This is extortion,” Panic said. “This is an attempt to physically liquidate a company.”

ICN Yugoslavia is the only significant asset that the government sold after the collapse of communism in Eastern Europe and breakup of Yugoslavia a decade ago.

Panic is a former prime minister of Yugoslavia who is a critic of Yugoslav President Slobodan Milosevic.

The Belgrade government’s move comes after ICN said in October that it may acquire the 25% of its Yugoslav unit that it didn’t already own as the Belgrade government seeks to repay millions of dollars in unpaid debt.

ICN last year said the Yugoslav government defaulted on $39 million in notes payable for drug 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 to it by cash-strapped Yugoslavia.

The Belgrade factory has endured the collapse of the Soviet Union, the breakup of Yugoslavia and United Nations sanctions limiting the purchase of Serb goods abroad.

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Bloomberg News contributed to this report.