ICN Breaks With Past, Outlines Growth Plans
By VITA REED
Welcome to “The New ICN Pharmaceuticals Inc.”
The Costa Mesa-based drug maker’s top officials hammered that theme home when talking with analysts and investors during a Bear Stearns & Co. healthcare conference in New York last month.
“This is a completely new and revitalized company bearing no resemblance to the former ICN,” Chief Executive Robert O’Leary said.
The old ICN had “too many products, too many facilities and was operating in too many countries,” O’Leary said. “But we’ve also found a number of strengths that point to a tremendous opportunity for us going forward.”
Industry analysts were critical of ICN under founder and former chief executive Milan Panic, saying that managers were too focused on growing sales, rather than cash flow or earnings.
Panic, a Serbian native who was ousted last year, focused on markets with “little growth potential, such as Central and Eastern Europe,” O’Leary said.
The new ICN, O’Leary said, is set to be a “fully integrated specialty pharmaceutical company, focused on infectious disease, neurology and dermatology with a robust R & D; capability and a worldwide capacity to commercialize products.”
ICN’s goal is to grow yearly revenue from about $740 million now to about $1.5 billion in the next five years, said Timothy Tyson (photo), president and chief operating officer.
The goal is to make ICN more like its midsize drug maker peers. They include New York-based Forest Laboratories Inc., which counts yearly sales of more than $2 billion and a recent market value of $19 billion.
ICN counted a market value of $1.4 billion last week.
Getting O’Leary and Tyson to expound more on their restructuring plan wasn’t successful. A company spokesman said they’ve been busy in meetings and wouldn’t grant interviews until after the company’s third-quarter results. They’re due later this month or in early November.
O’Leary and Tyson were talkative at the Bear Stearns meeting. The duo, along with Chief Financial Officer Bary Bailey, said their plans for “the new ICN,” include:
n Focusing on three major areas: infectious disease, neurology and dermatology.
n Identifying and focusing on 10 major markets. Besides the U.S., those include Canada, the U.K., France, China and Mexico.
n Marketing nine global drugs, along with a smattering of regional drugs. Those include dermatology medicines Efudex and Kinerase; Mestinon, used to treat neuromuscular disorder myasthenia gravis; and Virazole, an infectious disease fighter.
ICN plans to practice what Tyson called “life cycle management” in marketing drugs. Additional clinical studies, reformulations, extensions of existing product lines and new usage registrations are set to be part of the effort, he said.
Streamlining sales also is on ICN’s to-do list, Tyson said. The company has a list of about 5,800 prescribing doctors who make up “about 75% of our business,” he said.
“This, of course, allows us to maintain a small sales force,” Tyson said.
ICN officials also said restructuring started last year is nearly done, particularly the cutting of corporate overhead. ICN cut nearly 300 jobs earlier this year, along with seeing nine senior executives during Panic’s reign leave. New management also changed out 31 of 76 senior managers.
ICN employs about 500 people in Costa Mesa.
The company also plans to cut its plants from more than 30 to as many as six. The company said it wants to end the year with fewer than 4,000 total workers, down from 11,000 now.
The August buyback of spun-off shares of Ribapharm Inc., the company’s biotechnology unit, has been part of ICN’s restructuring.
Tyson said bringing Ribapharm back into the fold gives ICN “high performance R & D; capability.”
ICN’s pipeline includes Hepavir B to treat hepatitis B, a liver ailment, and Viramidine, a treatment for hepatitis C that’s in phase II clinical trials.
But Ribapharm is no silver bullet for ICN. Royalties paid to ICN by Schering-Plough Corp. for use of Ribapharm’s flagship ribavirin compound could slip as lower-cost competition from Roche Holdings AG and generics make inroads.
ICN is looking at possible acquisitions down the road, according to Tyson.
“As you can see, we have some gaps to fill, and we will do so through acquisition,” he said.
The company has evaluated some 150 potential deals and has around $220 million in cash available for deals, “even after Ribapharm,” Tyson said.
For now, ICN’s been busier selling off businesses. The company has gotten rid of a good deal of unwanted businesses, including its former Russian pharmaceutical and drugstore subsidiaries. The company’s biomedical testing business was sold to Panic in July.
The moves all are part of transforming ICN into what O’Leary called “a true operating company.”
“We expect to accelerate the process with new product development and acquisitions,” he said.
ICN still is dealing with some old issues. A former ICN worker sued the company, Panic and former president Adam Jerney, for sexual harassment last month. Panic has settled six sexual harassment lawsuits filed against him through the years.
The woman alleged she was assaulted and coerced into a sexual relationship with Jerney and was harassed by Panic. A lawyer representing Jerney and Panic said they believed the claims are without merit. ICN has declined to comment on the suit.
