Top Ribapharm Execs Threaten to Quit in Protest
Escalating the bitter battle for control of Ribapharm Inc., the drug maker’s top management threatened to quit Monday in protest over majority shareholder ICN Pharmaceuticals Inc.'s plan to fire most of Ribapharm’s board of directors.
Ribapharm said its chief executive, Dr. Johnson Y.N. Lau, along with Chief Financial Officer Thomas Stankovich and general counsel Roger Loomis, would resign unless ICN backs off its plan to remove five of Ribapharm’s six board members.
Ribapharm’s statement Monday was the latest salvo in an unusual corporate battle between a company and a rebel spinoff firm.
The conflict between the two Costa Mesa companies centers on a lucrative hepatitis C drug known as ribavirin, which is made by Ribapharm. ICN, which owns an 80% stake in Ribapharm, spun off a 20% stake in the firm in April.
Ribapharm is pressuring ICN to complete the spinoff as part of a long-awaited restructuring. But ICN is having second thoughts, as it continues to benefit financially from its big stake in Ribapharm. In the third quarter, ICN’s royalties from ribavirin more than doubled from a year earlier, to $63.4 million.
In announcing last week a plan to shake up Ribapharm’s board, ICN alleged that the spinoff company awarded inappropriate cash bonuses and stock options to managers after the firm’s first-time stock offering last spring. ICN also obtained a court order preventing Ribapharm from making any major business decisions until changes are made at Ribapharm’s board.
In response, Lau said Monday: “Our senior management team is committed to ensuring that shareholder value is enhanced and, regretfully, we feel we must resign if our independent directors are terminated by ICN. We do not feel Ribapharm’s full value can be realized if its board of directors is gutted.”
An ICN spokesman could not be reached for comment.
In a letter last week, ICN’s chief executive, Robert W. O’Leary, said his company had not decided whether to proceed with a full spinoff of Ribapharm.
One Wall Street analyst said the management of Ribapharm could be trying to save face, as ICN might oust them after shaking up the board. “Maybe this is a way they can say, ‘We quit,’ rather than being fired,” Larry Smith, an analyst at Gerard Klauer Mattison, told Bloomberg News. Smith has a “buy” rating on Ribapharm’s stock.
Ribapharm executives said Monday that they just want ICN to make good on plans to complete the spinoff and that all compensation and recent bonuses are in line with other mid-size pharmaceutical firms.
Lau said he and his team have delivered on all major company objectives, such as increasing investment in research and development. He noted that his team increased net income 113% to $90 million in the first nine months of this year compared with last year.
On Monday, ICN’s shares fell 43 cents to $10.87. Ribapharm’s stock closed at $6.34, up 3 cents. Both trade on the New York Stock Exchange.