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ICN to Settle Suit Over Ribavirin

The drug maker, accused of misleading investors, agrees to pay $1 million and allow federal review of its news releases.

November 26, 2002|Denise Gellene | Times Staff Writer

ICN Pharmaceuticals Inc. of Costa Mesa on Monday agreed to pay $1 million and accepted an unusual federal review of its drug-related news releases to settle a lawsuit by the Securities and Exchange Commission charging that it misled investors about its hepatitis C drug ribavirin.

Company founder and ex-Chief Executive Milan Panic, a former prime minister of Yugoslavia, also agreed to pay $500,000 to settle similar charges against him.

The settlements end a 1999 civil suit in which the SEC accused ICN and Panic of withholding bad news about the drug in 1994 and 1995.

ICN, Panic and two former executives who also settled with the SEC on Monday neither admitted to nor denied any of the charges. The SEC said that former ICN Vice President Nils O. Johannesson and former General Counsel David C. Watt settled the changes against them by agreeing not to violate securities laws in the future.

As part of its agreement, ICN will submit news releases about its drugs to the Food and Drug Administration for review before they are distributed. The releases must be reviewed by three ICN board members as well.

SEC attorney Merri Jo Gillette said she was not aware of any other case in which the commission required a pharmaceutical company to submit its news releases to the FDA.

In its suit, the SEC alleged that in November 1994 ICN learned that the Food and Drug Administration would not approve ribavirin as a stand-alone treatment for hepatitis C. Nonetheless, the SEC said, ICN waited four months to disclose the news to investors. After ICN revealed that the FDA had rejected ribavirin, the SEC said, the company's share price plunged 34% in two days. Ribavirin later was approved for use in combination with a drug from Schering-Plough Corp.

ICN said that it already had created reserves for the civil penalties and was happy to put the case behind it. The company said that the settlement allowed it to apply to the SEC to lift restrictions on issuing its news releases after 18 months.

The agency's case against ICN bears some similarities to the SEC's investigation of ImClone Systems Inc., which is under government scrutiny for allegedly misleading investors about its experimental cancer drug Erbitux. Last December, the FDA rejected ImClone's application to approve the drug for reasons that were not immediately disclosed to investors.

Gillette, a trial attorney in the SEC's Philadelphia office, said the settlement reached with ICN was "specifically tailored to the misconduct" alleged against it.

ICN's stock closed Monday at $11.62, up 14 cents, on the New York Stock Exchange.

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