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ICN Posts Record Earnings in a Dramatic Turnaround

Stocks: Troubles aside, company turns its fortunes around. Chairman vows to regain seized Yugoslav factory.


A year after suffering a crushing loss in Eastern Europe, ICN Pharmaceuticals Inc. on Thursday reported a strong turnaround, and its controversial chairman vowed again to reclaim the company's plant seized by Yugoslav strongman Slobodan Milosevic.

The multinational drug maker said it earned a record $118.6 million last year. It was a dramatic recovery from a $352.1 million loss in 1998 when a series of crises, abroad and internally, battered the Costa Mesa firm and its internationally known chairman, Milan Panic.

Panic, former Yugoslav prime minister and now a leader in a Serbian group opposing Milosevic, has been beset in recent years by sexual harassment lawsuits, regulatory investigations and other problems that have left Wall Street cautious about the company.

Thursday's report, though, boosted confidence.

"These numbers are good," said analyst Eugene Melnitchenko of Sutro & Co. "I think it will change some of the skepticism on Wall Street because, until the numbers were reported, there was concern that ICN has disappointed before and might disappoint again."

The company's annual earnings amounted to $1.45 a share; it lost $4.71 a share last year. Annual sales fell 11% to $747.4 million.

The company posted record earnings and revenue for the fourth quarter. Its profit was $38.4 million, or 47 cents a share, a turnaround from the $223.3 million loss, or $2.85 a share, it took in the prior year's final three months when the company wrote off its seized plant in Galenika, Yugoslavia.

But Wall Street has long viewed the company with caution. Its stock has often seesawed on the New York Stock Exchange and has lost 14% of its value this year. It gained 94 cents Thursday to close at $21.88 a share.

"The company has completed a major, major event, which is getting out of crisis and getting into record sales and earnings," Panic said. "I think the storm is over and that we can look at additional sales and earnings."

With two lawsuits pending to recover the Galenika plant, the company worked to revive its remaining Eastern European operations, primarily in Russia. It also was buoyed by sales of its main product, the antiviral ribavirin drug.

Sales of ribavirin soared last year. The drug is used by Schering-Plough Corp., along with its own interferon drug, as a combination treatment for the highly contagious, potentially fatal liver disease hepatitis C.

ICN's royalties from the ribavirin sales nearly tripled last year to $109 million from $37 million the previous year. For the last three months, royalties were $33 million, compared with $11 million in the year-earlier fourth quarter.

Thursday's news "confirms that the company's earnings are on track," said Sena P. Lund, an analyst with Mehta Partners in New York.

"If they have two, three good quarters in a row, people will forget the negative earnings that came out before," she said.

"But I think there is more to do," she said. "They have to put a clear picture on what they will do in Eastern Europe. If those questions are answered in the next couple of months, investors will gain confidence and put their money in."

Shareholders have long been upset with the company's inability to enhance the value of its stock and some have proposed spinning off the Eastern European operations.

Panic, who has survived efforts to oust him, said the company should know within 60 days whether it will spin off up to 30% of those operations.

"From now on, Eastern Europe will finance itself," he said.

Panic also expects to win the fight for the Galenika plant, though he won't wage that battle in Belgrade, he said, "because there is no judicial system functioning."

In the United States, Panic and ICN still face battles. In a pending fraud lawsuit in Los Angeles, the Securities and Exchange Commission accuses ICN of making misleading public statements and failing to disclose publicly material information about the government's rejection, in November 1994, of the company's effort to use ribavirin to treat hepatitis C.

The company, meantime, said it wants to put $100 million of ribavirin royalties into its research efforts. Panic said he is optimistic about a new drug called levovirin, which he said is an improved version of ribavirin. The new drug is still in development.

"We believe it is a very important single or combination drug in the treatment of infectious diseases," he said.

Panic, 70, has said at times over the last five or six years that he would like to retire soon. On Thursday, he said he does not know how much longer he will continue at the helm of the company he created.

"If we could find someone to replace me and continue record earnings and record sales, I would go to my boat," said Panic. "But if I am not here tomorrow, I want to assure them there is extraordinary management in place to do what I already do." (BEGIN TEXT OF INFOBOX / INFOGRAPHIC)

ICN Rebounds

After suffering a huge loss in 1998, ICN Pharmaceuticals Inc. returned to profitability with record earnings last year.


Sales 1995 507.9 1996 614.1 1997 752.2 1998 838.1 1999 747.4 Net income 1995 67.34 1996 86.93 1997 113.92 1998* -352.07 1999 118.63


* Despite high sales, ICN's loss was due to a plant seizure in Yugoslavia.

Source: Bloomberg News

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