Swiss Firm Takes Stake in ICN Unit

Swiss drug company Roche Holding AG agreed to swap a stake in ICN Pharmaceuticals Inc. for 8.7% of an ICN unit with rights to a top-selling hepatitis C drug, ICN said Thursday.

The transaction gives Roche a stake in the division known as Ribapharm, which controls the drug ribavirin and an early version of its potential successor.

Roche has an option to raise its Ribapharm stake to 17.5% by buying more ICN shares and then converting them, ICN said.

The swap moves Roche closer to the business that attracted it to ICN, the Costa Mesa company’s hepatitis C drug franchise, analysts said. The agreement also adds a twist to the rivalry between Roche and ICN’s ribavirin marketing partner, Schering-Plough Corp. Both competitors are keeping an eye on ICN’s next-generation hepatitis C drug, levovirin.

“ICN is cleverly keeping all doors open. Schering-Plough has a lock on ribavirin now,” said Corey Davis, analyst at Chase H&Q.; “The big question is: ‘Who is going to get what’s next?’ They’ve got what both of them want.”

Basel, Switzerland-based Roche owns 3.97 million ICN shares, ICN said. At ICN’s closing price of $30.25 on Thursday, that translates to a stake worth about $120 million.

That places Ribapharm’s value at about $1.4 billion, which is less than expected, said Morton Cohen, chairman of Clarion Capital, which owns ICN shares. ICN Chairman Milan Panic has said Ribapharm might be valued at roughly $3 billion.

ICN shares fell 94 cents to $29.31 on the New York Stock Exchange.

Roche said it will swap all of its ICN shares, which represent a stake of almost 5%, into Ribapharm once the company is spun off.