Despite what were described as promising test results for its potential AIDS drug, ICN Pharmaceuticals Inc. common stock plunged in heavy selling Friday by Wall Street speculators who were expecting even bigger news.
"The expectation was that the (announcement) by the company would be broader in scope and impact," said Adele Haley, a drug analyst with the investment banking firm of Smith Barney, Harris Upham & Co.
At a press conference in Washington Friday, ICN said the tests indicated that the drug can prevent AIDS from developing in patients who harbor the AIDS virus but have no symptoms.
In the selling frenzy that followed the announcement, ICN stock plunged $4 a share to close at $21.25. More than 3.3 million shares--or more than 20% of the company's total outstanding stock--changed hands, making it the New York Stock Exchange's third most active issue.
Craig Dickson, an analyst with Interstate Securities Inc., a Charlotte, N.C., investment firm, also attributed the sell-off to investor disappointment that federal regulators did not issue a positive statement concerning Virazole, also known by the generic name of ribavirin.
"The expectation must have been that the announcement today would include a full and complete endorsement by the Food and Drug Administration," he said. "The stock was bid up on speculation and sold off on the news today."
An FDA spokesman said Friday that the agency "will continue to review" ICN's data, which under a recently enacted FDA policy affecting potential AIDS drugs, will receive expedited consideration. The spokesman declined to discuss the trial results.
ICN, as well its two publicly traded subsidiaries, Viratek and SPI Pharmaceuticals Inc. have run up sharply on the stock market over the last year, largely because of investor speculation that Virazole is an AIDS miracle drug. During 1986 ICN shares increased 31% in price while Viratek shot up 492% and SPI increased 138%.
Shares of other drug makers with potential AIDS remedies have also skyrocketed during the past year, including Genetech Inc. and Great Britain-based Wellcome Group, parent of Burroughs Wellcome Co., which manufactures the drug azidothymidine or AZT.
But, because of the wide speculative interest, ICN and its two subsidiaries have also been among Wall Street's most volatile issues.
Last month, for example, ICN and Viratek shares plunged on heavy one-day volume after a New York investment firm questioned Virazole's effectiveness in low doses, and investors learned that some clinical trials would continue into January, two months later than expected.
Some Analysts Skeptical
Those trials, which involve patients with AIDS-related complex--those who display some symptoms of the deadly disease, but do not have full AIDS--will be completed next week, Milan Panic, ICN's chairman, said in an interview Friday.
Some analysts are skeptical about Virazole, which despite nearly 20 years of research, has so far been approved only for treating respiratory syncytial virus, or RSV, a sometimes fatal infant disease.
"I think that ICN's past record leads one to be skeptical more often than not," remarked a drug analyst for a major Wall Street investment firm who asked that his name not be used.
Criticism that ICN hypes its drug was at least partially vindicated last year when the FDA took the unusual step of disciplining the company for making false and misleading claims in press kits distributed in early 1986 after Virazole was approved for treating RSV.
In a letter to Milan Panic, the FDA objected to a company statement that the drug was "so free of side effects that it could be used in premature infants." The agency said also that ICN "grossly exaggerated" the drug's efficacy against ailments other than RSV. ICN was forced by the agency to send corrections to all recipients of the original announcement.
Friday's press conference was held at the posh JW Marriott Hotel and seemed to include almost as many securities analysts as journalists. A similar conference in Costa Mesa, which was linked to Washington by a live audio feed, was attended by about a dozen reporters and television news crews from as far away as San Francisco.
Some analysts have suggested that in announcing partial test results Friday, ICN may be attempting to generate new publicity for Virazole on the eve of an FDA meeting to consider the merits of AZT.
However, Panic denied any connection between the timing of the announcement and the FDA meeting, saying that it merely would have been "immoral" not to reveal the results of the trials to the patients involved.