Grand Jury Won’t Indict Panic, Other ICN Executives

After a five-year investigation, a federal grand jury has decided against indicting the chairman and other executives of ICN Pharmaceuticals Inc. over claims they misled investors about prospects for its prize drug, the company said Monday.

The grand jury, however, still is considering an indictment against the Costa Mesa drug company itself on a charge of misleading investors in late 1994 by failing to disclose that the government would not approve ICN’s antiviral ribavirin drug to treat the hepatitis C liver disease.

ICN said in its annual report filed Monday with the Securities and Exchange Commission that it is discussing a plea bargain to settle the criminal issue.

The company, which also is facing an SEC lawsuit accusing it of misleading investors, said it has set aside $9.25 million to cover potential settlement liability and costs in both the criminal investigation and the civil case.

“I think this is very good news for ICN,” said Susan R. Estrich, a USC law professor and advisor to the company. “This substantially ends a lot of uncertainty.”

A spokesman for the U.S. attorney’s office in Los Angeles declined to comment on the criminal case. An SEC attorney handling the civil case from Philadelphia could not be reached for comment.

Milan Panic, ICN’s chairman, was not available for comment.

ICN’s legal difficulties have long troubled some investors, said David Saks, an analyst at Saks/Gruntal MedScience Fund in New York. Resolving those issues, he said, “has to be viewed as a constructive development for ICN no matter how you look at it.”

Given that ribavirin has since been approved for use in combination with a Schering-Plough Corp. drug, Estrich said she believes the government has a weak case. Even so, ICN is better off settling than fighting a protracted and expensive legal battle, she said. Schering-Plough sells ribavirin and its interferon drug in a combination called Rebetron to treat hepatitis C.

The $9.25-million reserve was taken against fourth-quarter earnings, forcing the company to revise its annual net income, excluding a one-time loss, to $90.2 million, or $1.14 a share, from its previously reported net income of $99.4 million, or $1.25 a share.

Both cases stem from the company’s four-month delay in disclosing a November 1994 notice from the Food and Drug Administration that the agency would not approve ribavirin as a sole treatment for hepatitis C.

In the days after learning about the FDA rejection, Panic sold nearly 80,000 shares for up to $22.50 a share. He has said he had been planning to sell the stock long before he learned of the FDA decision. Other executives also sold shares.

When the company revealed the FDA’s decision to investors in February 1995, ICN’s stock fell 41% in six days to $13.25 a share.

The SEC considered filing a lawsuit accusing the executives of insider trading, but instead filed one in August 1999 alleging that they misled shareholders.

Investors who bought shares during the four-month period also sued over the incident. In mid-1997, ICN paid $15 million to settle with them.

In late 1996, the company paid $14.5 million in cash and stock to settle a 9-year-old shareholder lawsuit accusing it of overly hyping ribavirin, which federal officials at that time had rejected as a treatment for AIDS.

ICN has struggled of late. Before revising its results, the company’s fourth-quarter profit had plunged 80% to $7.6 million from the year-earlier quarter and missed already reduced estimates.

ICN stock lost 81 cents Monday to close at $24.62 a share on the New York Stock Exchange.