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OC LEADER BOARD: Opinion, Analysis, Insight

Milan Panic, a Serbian immigrant who fled communism in the 1950s, is a key pioneer in Orange County’s pharmaceutical industry.

Panic, who was trained as a biochemist, studied chemistry at University of Southern California, but rather than waiting for the advanced degree, he dropped out to start a business funded by local physicians and a few of his professors.

Over 42 years, he created a billion-dollar drug company. In the end, he achieved the ultimate reward—a life-saving drug.

Panic’s journey was marked by extraordinary successes and spectacular falls. Remarkably, after each setback, Panic guided ICN Pharmaceuticals to higher levels of sales and profit. Here are seven pivotal events in Panic’s business career:

Ribaminol

Panic founded International Chemical & Nuclear, or ICN, in his Pasadena home in 1960 to create new drugs from nucleic acids.

In 1966, he hired Abbott’s Dr. Alvin Glasky, the developer of the memory enhancer Cylert. Housed in a trailer, Glasky synthesized ribaminol, an RNA derivative. Foremost-McKesson Inc. was divesting a pharmaceutical manufacturer named Strong Cobb Arner, or SCA.

Despite having no cash, Panic convinced Foremost Chairman Rudy Drews to let ICN bid on SCA. Then, he persuaded the famed Fidelity fund manager Gerald Tsai to buy thinly traded ICN stock listed on the pink sheets.

Glasky presented ribaminol to the American Psychiatric Association. The compound was more potent than Cylert in rat studies. The Wall Street Journal reported the news, sending ICN stock over $120 per share.

Panic closed a private placement and bought SCA. Drews followed with $25 million per year Rawson Drug, this time taking $8 million in ICN stock. ICN sales rocketed from $600,000 to $41 million in one year.

Armed with cash flow, Panic leased 10 acres on Jamboree Road in Irvine and constructed a four-building research campus called the Nucleic Acid Research Institute. By 1972, 60 PhDs had synthesized 5,000 compounds with biological activity.

ICN 225

NARI focused on antiviral candidates active in respiratory disease. Upper-tract infections played a role in 60% of all episodes of human illnesses.

In June 1972, NARI scientists J.T. Witkowski, Robert Sidwell and Roland Robins synthesized a triazole nucleoside active in tissue culture against adenovirus, herpes virus, influenza A and B, hepatitis B, measles and mumps and other RNA and DNA viruses. Named ribavirin, it was lauded as the next penicillin.

The news further bolstered ICN, which was approaching $150 million in sales with EPS growing at 30%.

Small-Particle Ribavirin for Flu, RSV

By 1978, ICN was bleeding. Several acquisitions were losing money, translation losses were rising on foreign debt and Panic was fighting the SEC and shareholders over alleged earnings misstatements.

ICN, once a darling of Wall Street, had lost 90% of its market capitalization. Sales had shrunk to $35 million, and NARI closed business. Investment research firm Value Line predicted bankruptcy. Unrelated to ICN, Dr. Vernon Knight of Baylor College of Medicine in Houston discovered that ribavirin in aerosolized form was effective in treating influenza. Knight tested 14 flu-ridden college students who inhaled the fine mist through a hose and face mask. By the second day, their symptoms diminished.

This discovery gave Panic and ICN new life. In 1980, he transferred ribavirin to a new subsidiary called Viratek and spun it to the public. The proceeds helped fund ribavirin’s phase 3 trials, leading to FDA approval by the mid-80s.

Eastman Kodak

Around that time, photo giant Eastman Kodak Co. invested $45 million in ICN.

The Centers for Disease Control and Prevention reported data showing ribavirin worked in vitro against the AIDS virus. The FDA classified the drug as 1-AA, or top priority.

Suddenly, ICN was a leader in the AIDs race. Banking firm Paine Webber issued a “buy” recommendation suggesting ribavirin could be the world’s largest selling drug. Panic tapped the Swiss capital market for over $550 million to buy distribution for ribavirin worldwide. In 1987, he bought 8.6% of F. Hoffman La Roche, later selling the shares for a $33 million profit and a license in perpetuity to a $20 million per year myasthenia gravis line.

Hepatitis C (HCV)

ICN was back in the hot seat by the end of the ’80s. The FDA put ribavirin on clinical hold. Kodak sold its stock.

However, a new strain of hepatitis called HCV had been identified and Sweden’s Karolinska Institute ran a pilot evaluating oral ribavirin in 10 patients. The prestigious medical journal Lancet published the positive results causing thought leaders to realize that ribavirin was a promising solution to HCV, which had become an emerging worldwide health threat.

This prompted Schering-Plough to license worldwide rights to the oral form of ribavirin for use in combination with Intron A. Rebetron, which was approved in 1998 and was sold as a kit containing ribavirin capsules. It generated $1.3 billion in annual sales in 2000. ICN’s ribavirin royalties were $270 million a year, essentially all pre-tax profit.

Valeant

In 2002, Panic now 72, was back in a proxy contest, but this time the odds were stacked against him. I couldn’t get the deciding vote from a major shareholder and had to be the bearer of bad news. He was in Waldorf’s Bull and Bear in New York City with a bunch of people. I slipped in and tried to quietly take a seat.

Within seconds Panic bellowed out, “Mark did you bring back the votes?” I apologized and shook my head no.

But rather than get mad, he smiled. He held up his glass of wine and uttered his trademark statement: “Well, it could be worse.”

Then Panic, making the best of things as always, said, “Let’s toast.”

He then asked who at the table could help him prepare a résumé. In all his life, he had never written one.

MP Biomedical

The résumé wasn’t necessary. Valeant’s board sold Milan the biochemical unit for his stock, about $15 million. He renamed it MP Biomedical, and ran it until he was 86 when he sold it to a Chinese firm for $150 million.

Editor’s note: Mark Taylor, chief executive of drug developer Hallux Inc. of Laguna Hills, was in charge of ICN’s North America unit from 1999 to 2003. Taylor’s father first met Panic in the 1960s when he wanted to soak up American life. Taylor recently published “Warrior CEO: The Remarkable Journey of Milan Panic and ICN Pharmaceuticals” that chronicles Panic’s 4-decade reign at ICN before it became Valeant. This article didn’t have space for Panic’s eight months as prime minister of Yugoslavia, or his noted cycling career. Maybe next time. Panic, who is on the Business Journal’s Legends List for the OC50, has homes in Newport Beach and Pasadena.

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