‘Troubling’ holidays for ICN, spinoff

Paul Clinton

A power struggle. A nasty legal fight. A war of words.

ICN Pharmaceuticals and spinoff Ribapharm, both based in Costa

Mesa, celebrated their holidays as any dysfunctional family would.

Instead of dipping into a punchbowl to share egg nog, they battled.

Tensions over ICN’s decision to retain 80% of Ribapharm -- during

the May public offering of shares -- boiled over on Dec. 20, when

Ribapharm executives needled their parent in an open letter.

“ICN committed publicly to spin off Ribapharm and, on behalf of

all our stockholders, we need to determine if ICN has now changed

that position,” wrote Johnson Lau, Ribapharm’s chair and chief

executive.

ICN responded three days later by announcing that it intended to

remove five of the six Ribapharm board members, including Lau.

In a return letter, ICN Chairman and Chief Executive Robert

O’Leary criticized the Ribapharm board’s decision to issue stock

options and cash bonuses to senior management earlier this month as

“unorthodox and highly inappropriate.”

O’Leary said ICN had “lost all confidence” in the current

Ribapharm board.

That same day, Dec. 23, ICN -- incorporated in Delaware -- filed a

lawsuit there asking a judge to sanction the removal of the directors

and issue a temporary restraining order limiting the Ribapharm

board’s decision-making authority.

Five board members, excluding Robert A. Smith, will be removed

effective Jan. 27.

The Delaware Chancery Court, on Tuesday, granted ICN’s request.

Under the order, the Ribapharm board is required to give 10 business

days’ notice before taking any action “outside of the ordinary

course” of running the company. The order includes restrictions on

issuing securities, incurring debt, acquisitions, dispositions and

licensing transactions.

On Thursday, Ribapharm answered back, calling the lawsuit

“retaliation for attempts ... to clarify ICN’s plans regarding the

spinoff.”

Lau said ICN’s boardroom coup was “deeply troubling.”

ICN sells its popular Hepatitis C drug Ribavirin through

Ribapharm. The companies hold a licensing partnership with

Schering-Plough Corp. to sell the medicine as part of a drug

cocktail.

ICN founder Milan Panic, the former leader of Yugoslavia, left the

company in June.

Representatives from neither company returned repeated calls last

week.

* PAUL CLINTON covers the environment, business and politics. He

may be reached at (949) 764-4330 or by e-mail at

[email protected].