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Executive Summary

ICN's PURCHASE OF 6.3% OF HOFFMANN-LaROCHE VOTING STOCK is an investment of approximately $200 mil. based on current exchange rates and the current per share price of Roche voting stock (300,000 Swiss francs). ICN disclosed the purchase Sept. 22 in a press release in anticipation of its third quarter report. F. Hoffmann-LaRoche, the Swiss parent of the worldwide Roche group, has 16,000 voting shares. The company says that more than 50%, "a clear majority," of the shares are closely held by family members. ICN's purchase gives the California company a holding of about 1,000 shares. The company had cash and marketable securities of about $375 mil. at the end of the second quarter. ICN's investment created an aura of prestige for the California company with the financial press. The affiliation with the Roche name may help ICN's image at a time when news concerning its major product continues to be bleak. ICN's major product in development, ribavirin for AIDS, remains tied up at FDA. ICN has continued to pursue a request for a Treatment IDN for the product; FDA has rejected the request twice. It would be hard to conceive of a more headline-grabbing move in the drug industry with a $200 mil. investment. For the same amount of money, ICN could have purchased only much smaller pieces of major U.S. drug companies -- e.g., about 1.5% of Lilly common or 2.8% of SmithKline. To try to buy more than 5% of a U.S. company, ICN would also have faced U.S. reporting requirements. The company did not have to register its accumulation of Roche with SEC. ICN said it has reported the purchases under Hart-Scott-Rodino. ICN disclosed the purchase with a terse press release, giving full play to the mystery of its intentions. ICN has used an investment in a Swiss drug company previously as a way to raise money. In early March of this year, ICN tied a $40 mil. (60 mil. Swiss franc) convertible bond offer to shares of Ciba-Geigy. In that offering, conducted outside the U.S., ICN said the bonds could be converted into 1.5 mil. shares of ICN stock at $26.14 per share; or 15,000 Ciba-Geigy shares at 4,000 Swiss francs per share; or 750,000 ICN shares and 7,500 Ciba-Geigy shares. In the bond financing, the Ciba-Geigy shares in effect added ballast for the bond purchasers.

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