Effort to Oust ICN Chairman Comes Up Short : Management: Shareholders put Costa Mesa drug maker’s chief on defensive in wake of falling earnings, stock price.
A shareholder revolt against embattled ICN Pharmaceuticals Chairman Milan Panic failed Wednesday, but the drug maker’s annual meeting here was a contentious affair as critics accused Panic of misleading investors about the company’s problems.
ICN shareholders rejected a proposal from the company’s largest investor to oust the controversial Panic, who also is chief executive of the Costa Mesa company, by imposing a mandatory retirement age of 70. Panic, who founded ICN, is 69 but turns 70 later this year.
Thirty-seven percent of the company’s shareholders voted in favor of the measure, which also was placed on the ballot last year by Milwaukee-based Heartland Advisors. The proposal required the approval of 75% of ICN’s shares.
Heartland President William Nasgovitz said Panic’s many legal problems and his arrogant style have hurt the price of ICN’s stock, which has fallen more than 37% since July. Nasgovitz said the company needs new leadership.
Panic, who charged that Nasgovitz is trying to hurt ICN with his attack, said the company’s sales and profits are at record levels. Panic said he does not know why the stock has slipped so badly.
ICN shares fell from $30 in August to Wednesday’s close of $18.75 after the company’s second-quarter results fell below analysts’ forecasts. The company, which sells more than 40% of its drugs in Eastern Europe, has been hurt by a currency collapse in Russia, where it sells many of its products. About half of ICN’s $439 million in sales last year came from Eastern Europe.
“Maybe I should spend more time selling the stock than building profits,” Panic said.
Brokerage firm officials and securities analysts at the meeting also expressed frustration with Panic, who responded by interrupting his critics or talking over them when he disagreed with their views. Voices were raised on both sides of the podium.
“Your feigning ignorance implies a lack of responsibility,” Patricia Loepker, portfolio manager with A.G. Edwards & Sons, told Panic. She said ICN’s stock is down because the company’s performance has fallen short of Wall Street projections, and Panic has done poorly at communicating with investors about changes affecting the company.
Panic acknowledged that his company has a reputation problem. “The problem is investor relations and what you perceive of us, not what we are,” he said.
Nasgovitz said he will seek to have another proxy question next year, in an effort to force the board monitor ICN’s management more closely.
“This is a board that doesn’t hold management’s feet to the fire, and it caters to Milan,” said Nasgovitz after the meeting. “In part, [Panic’s] the problem, but he’s also the solution.”
Panic said he has no plans to step down and that he will focus on boosting ICN’s stock price and attempt to improve investor relations.
“Shareholders are frustrated,” said activist shareholder David Batchelder, who was appointed to ICN’s board last month after his Relational Investors LLC bought 1.6 million ICN shares.
Batchelder, who buys stakes in troubled companies and works with them to boost their share price, said he supported the Heartland measure as a means to express frustration with Panic.
The Serb-born American businessman, who served as Yugoslav leader for eight months in 1992 and 1993, faces a civil lawsuit brought by the Securities and Exchange Commission that alleges he misled investors about the prospects of an experimental drug. The suit seeks to prohibit Panic from running any public company.
Panic said the SEC’s lawsuit, which followed a 4 1/2-year investigation, has no merit. The SEC initially accused Panic of insider trading. In 1991, Panic paid $600,000 without admitting wrongdoing to settle an SEC charge of making false and misleading statements about Virazole for treating AIDS.
The most recent investigation targeted Panic’s sale of $1.24 million of ICN shares in December 1994, after the company allegedly learned its bread-and-butter product, the antiviral drug Ribavirin, would not be approved by the Food and Drug Administration to treat hepatitis C.
The bad news wasn’t revealed to investors until February 1995. ICN’s stock fell 41% in six days, to $13.25 a share.
The SEC eventually dropped the insider trading allegation, but on Aug. 11 of this year, the commission filed suit in California alleging that Panic and other top executives made fraudulent statements about Ribavirin. The suit seeks a $500,000 fine and try to prohibit Panic from serving as an officer of a public company.
Bloomberg News contributed to this report.
