ICN Profit Falls 23% as Ribavirin Sales Slow

Costa Mesa drug maker ICN Pharmaceuticals Inc., facing a contentious annual meeting this month, said first-quarter profit fell 23% as costs rose and royalty revenue declined from its biggest product, the ribavirin hepatitis C drug.

ICN said net income fell to $21 million, or 26 cents a share, from $27.4 million, or 34 cents, a year earlier. Revenue increased 3.4% to $199 million as revenue from royalties fell 17% to $27.6 million.

The slowdown in ribavirin sales came as Schering-Plough Corp., which sells a combination of ribavirin and Intron A called Rebetron in the United States, sought U.S. regulatory approval for a new combination using an improved form of Intron A along with ICN’s drug.

That has made doctors reluctant to prescribe Rebetron as they await approval of the new combination, ICN has said.

ICN shares fell 65 cents to $26.20 on the New York Stock Exchange. The stock is down about 15% this year.

The quarterly earnings were a penny higher than the average estimate of three analysts polled by First Call/Thomson Financial.

The company’s research and development costs rose about 60% to $6.4 million as it continued to develop its next-generation hepatitis C drug, levovirin. In February, ICN began the first of three phases of testing generally required for U.S. regulatory approval.

The results come as ICN prepares for its May 30 annual shareholders meeting, at which a dissident shareholder group led by Special Situations Partners Inc. will try to get three nominees elected to the drug maker’s board.

Special Situations, which owns about 4.5% of ICN, has criticized management for not moving faster with its plan to split into three companies. In October, bowing to pressure from Special Situations and others, ICN Chairman Milan Panic agreed to split the company and give up control of the new unit, known as Ribapharm, that controls rights to ribavirin.

Before spinning off Ribapharm and ICN’s international units to shareholders, ICN plans to sell shares of both companies to the public. ICN expects to sell as much as 40% of the international business in June, though the company said it’s waiting for the weakened stock markets to improve before selling shares of Ribapharm.

“Since the company isn’t in need for cash, we have made the decision to observe the market and therefore get the highest price for our most valuable asset,” Panic said on a conference call.

Special Situations argues that ICN should proceed with a distribution of Ribapharm shares to investors even if market conditions make the public offering unattractive.

“It’s our position that, if market conditions preclude the long-promised public offerings, ICN can and should move forward--seek any necessary tax rulings and debt-holder consents--and distribute 100% of Ribapharm to ICN stockholders as soon as possible,” Eric Knight, managing director of Special Situations, said in a statement.