ICN Shares Jump 30% on Restructuring News
Investors boosted ICN Pharmaceuticals Inc.’s shares by 30% Thursday after the Costa Mesa company announced a new management team, a restructuring plan and better-than-expected earnings.
The company said Robert O’Leary, who had been serving as interim chief executive, will take the position permanently. ICN also named Timothy Tyson, an executive at British drug maker GlaxoSmithKline, as president and chief operating officer, and Bary G. Bailey, an executive vice president at PacifiCare Health Systems Inc., as chief financial officer.
Analysts said the top management appointments encouraged shareholders despite the fact that ICN reported a net loss of $74.9 million, including asset write-downs, or 90 cents per share. That compared with a loss of $11.7 million, or 14 cents a share, a year earlier.
But ICN’s third-quarter operating earnings beat Wall Street projections by 3 cents a share. ICN reported a profit of 18 cents per share for the third quarter, not counting one-time items, up from 12 cents a year earlier. Revenue rose 18% in the third quarter to $215.9 million.
ICN shares finished the day up $2.79 at $11.99 on the New York Stock Exchange.
Analysts also said the company’s restructuring plan signals that ICN’s leadership will steer a much different course from that of its founder and longtime chief, Milan Panic.
Among other things, ICN said it will sell its Eastern European and Russian businesses as well as its raw-materials operations in Hungary and the Czech Republic as part of its concentration on specialty pharmaceuticals, O’Leary said. Even the company’s converted Boeing 737-100 corporate jet is on the selling block, and its smaller JetStar has already been sold.
“We are doing the logical things that need to be done to get back on track,” O’Leary, 58, said in an interview. “We were a specialty pharmaceuticals company before that term was invented. We have a wonderful global footprint, but we were spread too thin and wide.”
O’Leary said ICN would place more emphasis on its dermatology unit and pharmaceutical sales in North America, Latin America and parts of Western and Central Europe. The company also announced that it would complete cost reductions amounting to $21 million by the end of the year.
The company continued to benefit from its 80% stake in Ribapharm Inc., which makes the hepatitis C treatment ribavirin. ICN received $63.4 million in royalties for ribavirin during the quarter, up from $24 million a year ago, because patients infected with the hepatitis C virus have begun taking it in combination with a newly approved Schering-Plough interferon drug called PEG-Intron that lasts longer and works better than older treatments.
Ribavarin royalties helped mitigate lower revenue and sales from the company’s North American specialty pharmaceutical business.
The restructuring signaled that “there is light at the end of the tunnel and that there is a viable business here that will be able to turn a decent profit,” said Arnhold & Bleichroeder analyst Richard R. Stover.
Herman Saftlas, an analyst for Standard & Poor’s, added that O’Leary is a respected manager who seems to have a good team in place.
