Expectations Sending ICN Stock Up

Speculation that ICN Pharmaceuticals Inc. may sell or spin off some of its operations has boosted the multinational drug maker’s stock price 23% in the past two weeks.

Long besieged by its major shareholders to increase the stock price, ICN hired an investment banker in February to come up with alternative ways to enhance value and had been expected to act by now on the recommendations.

Now, analysts say, Wall Street traders are reacting to the possibilities as the Costa Mesa company’s mid-June telephone conference call with industry analysts approaches.

“People are beginning to express curiosity,” said analyst Viren Mehta of Mehta Partners in New York. “It’s clear that the company intends to do something.”

ICN shares rose $2.81 to close Wednesday at $34.81 on the New York Stock Exchange. Two weeks ago, the stock was at $26.69 a share.

Company executives declined to comment Wednesday on the rise in its stock price.

Over the past two decades, the company’s stock has soared and plummeted mostly on news about the prospects that its antiviral drug, ribavirin, could be used to treat various diseases. By the late 1990s, institutional investors became upset with the company’s operations and a languishing stock, and won a seat on the board last year.

But even as the company began pulling in profits from ribavirin’s use in a treatment for the highly contagious liver disease hepatitis C, it is still facing calls from some investors to sell its European operations.

In hiring investment banker Warburg Dillon Read three months ago, the company’s chairman, Milan Panic, said that “all options” would be considered for ICN’s Eastern European drug unit and its biomedicals group, which sells radiation badges, diagnostic products and chemicals.

The company has remained tight-lipped, though, about any Warburg Dillon recommendations.

In Eastern Europe, ICN suffered crushing losses stemming from economic and political turmoil in the region, including the seizure of a plant in Belgrade by Yugoslav President Slobodan Milosevic.

In Russia, operations also have been hurt by a decline in purchasing power after the ruble began weakening in late 1998 and the economy went into recession.

Providing answers soon on Eastern European operations might help investors gain confidence in the company and persuade them to put their money back in, analysts have said.

Though problems in Europe and elsewhere have caused Wall Street to view the company with caution over the years, ICN seems to be coming out of murky waters. In March, it reported net income of $27 million, up 21% from $23 million the year before.

“[ICN] seems to have gone through some rough patches, but it seems to be back under control,” Mehta said. “They are clearly one of the more inexpensively valued companies in the sector.”

Sales of ICN’s ribavirin continue to soar as well. Schering-Plough Corp. sells ribavirin along with its own drug Intron A in a combination known as Rebetron. ICN receives royalties on Rebetron sales.

Bloomberg News contributed to this report.

(BEGIN TEXT OF INFOBOX / INFOGRAPHIC)

Taking Off

In the past two weeks, investors have bid up shares of ICN Pharmaceuticals Inc.

May 31: $34.81

Source: Bloomberg