Roche Seeks Stake in ICN’s Ribapharm Unit

Roche Holding AG is in discussions on swapping a stake in ICN Pharmaceuticals Inc. for stock in the ICN unit that controls rights to its blockbuster hepatitis drug ribavirin, according to people familiar with the talks.

ICN Chairman Milan Panic met with Roche officials Wednesday in Basel, Switzerland, and an announcement may come as early as this week, the sources said. Roche owns less than 5% of the company, they said.

The move comes as Costa Mesa-based ICN prepares to sell shares in the unit, called Ribapharm, to the public in a restructuring designed to boost its stock. The transaction would give Roche a stake in the company that owns rights to the ribavirin hepatitis C drug and potential access to a new version of ribavirin in early stages of development that could become ICN’s next blockbuster.

It could also be a prelude to an acquisition of Ribapharm, analysts said.

“For ICN, it clearly gives credibility to Ribapharm for a successful IPO. You can make the argument that Roche believes Ribapharm will be a better financial investment than ICN,” said Richard Stover, an analyst at Arnhold & S. Bleichroeder.

Stover said he has no knowledge of the discussions between Roche and ICN or whether they ever took place. “This is all just speculation at this point,” he said.

ICN spokesman Peter Murphy declined to comment. Roche spokeswoman Jacqueline Wallach said Roche never comments on market speculation or rumors.

ICN stock rose $3.56 a share to $30.25 on the New York Stock Exchange.

Roche in Race to Get New Drugs on Market

Roche is developing a new hepatitis medicine, known as Pegasys, which it says could have annual sales of about $596 million. The company has also tested the medicine with ribavirin.

Ribavirin is currently sold by Schering-Plough Corp. as part of a combination therapy with Schering-Plough’s Intron A known as Rebetron.

Schering-Plough is also seeking approval for a new hepatitis drug, known as Peg-Intron, and is in a race with Roche to get the new drugs on the market.

Schering-Plough last week said it’s seeking approval to sell ribavirin separately from Intron A. If ribavirin wins regulatory approval as a solo therapy, it could give Roche greater flexibility in marketing its own medicine, should studies show that a combination of the two treatments is successful. Roche applied for U.S. Food and Drug Administration approval of Pegasys in May.

Analyst Stover said one of the real gems at ICN could be levovirin, the improved version of ribavirin that is still in early stages of development.

“The most valuable things not spoken for at ICN are the sons of ribavirin,” known as levovirin and viramidine, he said. “If levovirin proves to work as well as ribavirin, without side effects, it could be much more valuable.”

ICN and Schering-Plough reached a licensing agreement last month, allowing Schering-Plough to license as many as three hepatitis compounds from ICN. As part of that agreement, Schering-Plough got the first and final rights to license levovirin and viramidine.

An eventual acquisition of Ribapharm by Roche would make those rights moot, Stover said.

Basel-based Roche is badly in need of a blockbuster medicine after a spate of research failures in the last two years. The company’s nonvoting shares have dropped 11% this year, even as the 21-member Bloomberg Europe Pharmaceutical Index gained 22%.

Roche has long been known for its financial dealings. The company is one of the world’s most profitable drug makers, even though it had only one medicine with annual sales of more than $1 billion in 1999. Last year, the drug maker pulled in about $2.7 billion from selling shares in Genentech Inc.