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ICN Shareholders Still Have Reason to Feel Unsettled About Company


Despite ICN Pharmaceuticals Inc.'s settlement Tuesday of two sexual harassment lawsuits against its chairman, Milan Panic, investors in the Costa Mesa drug company still have plenty to worry about.

While the settlements diminish the possibility that Panic could be ousted over his behavior, stockholders still have to contend with the company's shaky prospects in Eastern Europe and Russia and, to a lesser extent, its continuing problems with federal securities regulators.

"For shareholders, there's a lot of other concerns--profitability and the fact that he [Panic] is under investigation for more serious matters," said Robert Wasserman, an analyst at Florida-based Southeast Research.

Indeed, economic and political turmoil in Eastern Europe and Russia have triggered a 57% drop in ICN's shares since hitting a record $52.25 in May. That erased the springtime euphoria over the company's record profits and robust expansion plans in Russia.

Now, there's nail biting after the Yugoslav government this summer defaulted on $39 million in notes payable to ICN for drugs and supplies sold to state medical institutions. The company stopped selling to the government and took a $130-million charge to cover money owed by Yugoslavia.

Last week, ICN said it might acquire the remaining 25% of its Yugoslavian division that it doesn't own through negotiations with the government over unpaid debt.

Meanwhile, analysts have slashed their earnings projections following the devaluation of the ruble and growing uncertainty about the Russian economy.

"It's still a volatile--very volatile--part of the world," noted Jim McCamant, an analyst at Medicalm Stock Letter, in Berkeley.

ICN recently postponed plans to build a $40-million factory in St. Petersburg, Russia, until 2000 or later.

The company also has yet to resolve other problems at home.

ICN said that the Securities and Exchange Commission intends to sue it for allegedly failing to fully disclose in a timely manner a key event four years ago. In November 1994, the government denied the use of the company's drug ribavirin as a stand-alone treatment for the severe liver ailment hepatitis C.

The company didn't disclose the details until the following February, touching off a 41% drop in the company's stock in six days of trading.

ICN has disclosed that the commission may seek to bar Panic as an officer of ICN. Arnold Burns, a New York lawyer representing Panic and the company, said Tuesday that he has been negotiating with the commission's staff in efforts to persuade the SEC to drop the attempt to oust Panic.

The commission recently withdrew from a related inquiry into possible insider trading by Panic in connection with the denial of ribavirin as a stand-alone. He sold 55,000 ICN shares, worth $1.2 million, the day after he learned that ribavirin wouldn't be approved.

The government did approve a combination of ribavirin and interferon as a treatment for hepatitis C earlier this year.

Analysts said it's likely that Tuesday's sexual harassment settlements aren't large enough to require financial disclosure of the amounts or hurt the company's bottom line. The amounts paid to former human resources director Mary Martinelli and executive secretary Michelle McKenney weren't disclosed.

Eugene Melnitchenko, a Sutro & Co. analyst, said the settlements relieve ICN's board of directors from pressure to take action against Panic, a valued executive spearheading its global expansion.

He noted that if the case brought by Martinelli had gone to trial this week and Panic lost, "the board would have a fiduciary duty to shareholders to support all laws and make sure that corporate officers do not violate them."

"The way it was resolved--he did no wrong and the company did no wrong--so the board is off the hook," Melnitchenko said.


* END TO SUITS: ICN settles two claims against chairman. A1

* END TO SUITS: ICN settles sex bias claims. A1

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