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Drug Yields Only Headaches for ICN, Shareholders : Medicine: As the marketability of antiviral Virazole wanes, critics point to company founder Milan Panic and his controversial tactics.

March 05, 1995|JAMES S. GRANELLI | TIMES STAFF WRITER

COSTA MESA — Milan Panic was upset. He was reading stories last winter about an outbreak in Southern California of RSV, a respiratory ailment that afflicts children, and never saw a word about the only drug that treats serious RSV cases--the drug his company makes.

A born salesman and autocratic leader, Panic ordered his staff at ICN Pharmaceuticals Inc. to put together a full-page advertisement for him to edit and approve. He believed that the drug, Virazole, could help afflicted children and that the public simply didn't know about it.

He also wanted to make money, and sales of Virazole were down.

"Looks like a cold. Is it RSV?" the big headline in the newspaper ads blared. The ad listed some symptoms--runny nose, coughing and rapid or labored breathing--and stated, "It could be RSV." The ad urged readers to call their doctors or a toll-free number.

Reaction was swift.

Angry doctors and nurses at Children's Hospital of Orange County in Orange had to take time preciously needed elsewhere to explain to numerous parents who phoned that the ad was oversimplified. The U.S. Food and Drug Administration sent a letter in protest, slapping the company on the wrist for engaging in such "marketing" activities, especially for a drug that could be used only for severe lower respiratory cases under a physician's supervision in a hospital.

Panic (pronounced PAN-eesh) couldn't understand why regulators didn't see what he saw. Virazole, the brand name for ribavirin, is a drug that can fight many viruses, and there are few drugs that can. In spite of its toxicity, it has fewer and less harsh side effects than other antiviral drugs. He sells it in 47 countries to treat up to 10 illnesses, from the flu to the AIDS virus.

Yet today, Panic and ICN are left to ponder whether there's much of a future for Virazole.

The company lost a bitter battle with the FDA in the late 1980s to get the drug approved to treat the AIDS virus, and ICN recently revealed that the agency has directed it to halt Virazole testing on hepatitis C, a highly contagious and potentially fatal liver disease.

The latest setback prompted lawsuits accusing Panic of withholding details on the FDA's rejection while selling his ICN stock for $1.24 million. The company's value plunged 42% over the last two weeks before rebounding a bit. It closed Friday at $15.375 a share, up 62.5 cents in New York Stock Exchange trading.

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Except for its use to treat RSV, Virazole has become what detractors have dubbed it--a drug in search of an illness.

That search has taken ICN on a long and tortuous path, and its stock price has risen as high as $33.75 a share and fallen as low as $2.31 a share with each promising development and each disheartening failure.

Panic, his directors and a host of investors so far have been willing to follow that path because they believe Virazole--after $200 million was spent on developing, testing and putting the drug through clinical trials--hasn't struck out yet and someday could be ICN's home-run drug.

Obtaining FDA approval to treat a major illness would propel the mid-size company into a prescription drug titan, joining the likes of Merck & Co., Burroughs-Wellcome and Schering-Plough.

That's more than a dream for Belgrade-born Panic, who defected from his former Soviet-bloc country in 1955 while on tour as an alternate cyclist on Yugoslavia's Olympic team. That has been his aim since leaving his post as a research lab technician at the USC chemistry department in 1959 to found the International Chemical and Nuclear Corp.

Panic went about methodically building his fledgling company as a biochemicals supply house, but had other goals in mind. He wanted to develop drugs, specifically one major drug that would propel the company to status as a leading pharmaceutical concern.

Biochemist Roberts A. Smith, a former USC colleague and co-founder, set the company's mission and oversaw drug research. His one-page 1964 "white paper" focused the company on drugs to combat cancer and viruses. The company then hired a leading chemist in nuclear medicine, Roland K. Robins, to develop the drugs.

Robins and a team he brought with him quickly formed about 5,000 compounds for fighting viruses and cancers, then whittled them down to a handful. Concentrate on just one, Panic told the researchers, because development costs were too high for a small company. By 1972, Robins had come up with ribavirin, a drug that seemed to attack more viruses and appeared to be less toxic than others being tested.

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Panic quickly seized on ribavirin as a broad-based antiviral drug. Ribavirin inhibits virus cells from replicating themselves and spreading. Panic's long-range intent for his company's antiviral drugs was grander--to protect, stimulate and repair enzymes that break down in cells and cause aging.

"As you grow older, the whole repair process slows up considerably," Panic told reporters. "If we can stimulate the process of repair, we can perhaps change the whole picture."

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