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News > Companies
SEC: 'ICN misled investors'
August 12, 1999: 9:11 a.m. ET

Drug maker's Chairman Milan Panic, others charged in suit over liver drug
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NEW YORK (CNNfn) - ICN Pharmaceuticals and key company officers, including Chairman and CEO Milan Panic, have been charged with fraudulently misleading investors about the status of its drug ribavirin, as a treatment for the liver disease Hepatitis C.
     The Securities and Exchange Commission filed a complaint in federal district court in Los Angeles Wednesday, alleging the company failed to immediately disclose that the Federal Drug Administration had rejected ICN's application to market ribavirin in 1994.
     The FDA's rejection letter was dated Nov. 28. 1994, and the company announced the rejection in a news release issued Feb. 17, 1995.
     "Prior to the issuance of that press release, ICN made numerous public statements which misled the public about the status of its ribavirin application," the SEC said.
     ICN disputed the charges in a statement released Wednesday night and said the company would mount a "vigorous defense."
     The pharmaceutical firm said investors understood, after a December 1994 press release, that ribavirin had been rejected as a stand-alone treatment and that "there was a significant road (sic) to hoe if there was to be approval."
     Last year, the FDA approved ribavirin for use with another hepatitis C drug, ICN said, just as the December 1994 press release anticipated.
     "That's exactly what the company's December 1994 press release said, and that's exactly what happened," said lawyer Arnold Burns, who represents ICN and Panic. "How can the SEC win a disclosure case under these circumstances? It can't."
     The SEC is seeking monetary penalties and injunctive relief against Panic and two other ICN officers. It also asks the court to bar Panic from serving as an officer or director of a publicly traded company.
    
SEC and Panic: Round 3?

     Panic, the former Yugoslav prime minister, has been in trouble with the SEC before.
     In 1991, Panic, ICN and a company subsidiary, Viratech, settled S.E.C. charges that they made false statements, the New York Times reported Wednesday. Under the terms of the settlement, the accused parties neither admitted nor denied the allegations.
     Then last summer, the SEC dropped an insider trading investigation against Panic for selling ICN shares a day after the company received the negative news about ribavirin from the FDA.
     "While the SEC has been looking at the disclosure issues since the beginning of its investigation, we always saw the insider trading claims as the principal motivation for, and primary focus of, the SEC probe," ICN's lawyer said in the company's statement Wednesday.
     ICN had asked the FDA to approve ribavirin, also known by its brand name Virazole, to treat chronic hepatitis C, a progressive liver disease that can lead to cirrhosis or cancer.
     After the FDA rejected ICN's application in 1994 and told company officials it was "not fixable," Panic directed a company official to keep the FDA's letter confidential, the SEC said.
     When the company did announce the "not approvable" letter on Feb. 17, 1995, ICN stock fell 23 percent, the complaint said, followed by another 15 percent drop on the next day of trading.
     Shares of ICN (ICN) rose 1-1/8 to 19-5/16 Wednesday, but are still well off their 52-week high of 36-3/8.
     ICN recently sought the U.S. government's help in fighting the Serbian seizure of ICN's Yugoslav operations. Yugoslav President Slobodan Milosevic is a political foe of Panic, who has been living in exile in the United States. Back to top
     -- from staff and wire reports

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