Pesky Investment Group Hikes ICN Stake

A European investment group that has been pressuring ICN Pharmaceuticals Inc. to split into three separate companies has increased its holdings in the Costa Mesa drug maker.

Since June 14, Special Situation Partners Inc. bought 185,000 ICN shares for $4.8 million, an average of $25.95 a share, according to a report filed Wednesday with the Securities and Exchange Commission.

The investor now holds 2.6 million shares, 3.3% of ICN, as well as options to buy 3.6 million more shares--a potential stake of 7.8%.

Special Situation said in a June 13 letter to ICN management that the company’s stock, then trading around $34.31, could be worth more than $50 a share if ICN were to make a clean split of its European unit and selected operations in North American and Latin America.

ICN on June 15 announced plans for an initial public offering of stock in its biotechnology business, which would own rights to the blockbuster hepatitis C drug Ribavirin. It also announced a partial spinoff of the unit running its international operations, including those in Eastern Europe. ICN would own more than 80% of both units.

The plan disappointed many investors, sending ICN shares down 20% the day it was announced. The stock closed Wednesday at $28.13, up 19 cents a share.

ICN’s plan is “mostly cosmetic” and “won’t change anything,” Special Situation said in a June 26 letter to ICN. The letter was included in the SEC filing.

Special Situation urged ICN to make a total break, splitting into a company handling its North American and Latin American operations and another company taking its Eastern Europe division, which has been roiled by economic and political instability, incurring hundreds of millions of dollars in charges for ICN. This would leave ICN as a “truly research-driven pharmaceutical company,” the investor said.

ICN officials couldn’t be reached for comment.