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ICN SETTLES SEC VIRAZOLE INVESTIGATION WITH CONSENT DECREE

Executive Summary

ICN SETTLES SEC VIRAZOLE INVESTIGATION WITH CONSENT DECREE filed in D.C. federal court on Oct. 7. The settlement "permanently enjoin[s]" ICN, its Viratek subsidiary, ICN CEO Milan Panic and ICN director Weldon Jolley from "future violations of the antifraud provisions" of the securities act and "from violating or aiding and abetting violations of the reporting provisions," the Securities and Exchange Commission said. "ICN, Viratek, Panic and Jolley have agreed to consent, without admitting or denying the allegations contained in the complaint," SEC said. The SEC allegations centered on ICN/Viratek's announcement of clinical trial results in 1987 for its Virazole (ribavirin) for the treatment of AIDS. "The complaint alleges that Panic and Jolley caused ICN and Viratek to make false statements to the investing public in press releases, investor mailings, satellite broadcasts, and in filings with the Commission regarding the results of two clinical trials" of Virazole. Specifically, the SEC complaint alleges that the company "failed to disclose . . . that there were serious flaws in the results of the first clinical trial," namely, that the placebo group contained sicker patients and that the primary endpoints of the trial were not achieved. The complaint also alleges that the company said "there were no data available regarding the success of the second clinical trial, when they were aware at the time that participants receiving the highest dosage of the drug in that trial were dying at a disproportionately greater rate than participants assigned to the lower dosage and placebo groups." With the consent decree, ICN has ended all government investigations of its handling of its studies of Virazole for the AIDS indication. The company settled an FDA-referred Justice Department investigation of its promotion of Virazole with a $ 600,000 payment in March ("The Pink Sheet" June 3, p. 7). "No fines or other sanctions were associated with the [SEC] settlement," ICN noted. The company characterized the agreement as a "bare bones consent decree" which will curtail any protracted legal costs. "Many wide-ranging charges were leveled against our companies and some of its management that led to substantial adverse publicity, including charges of stock manipulation and insider trading," Panic said. The settlement, however, "did not include any allegations of stock manipulation or insider trading," Panic noted. Instead, ICN maintained, the charges focused on "the disclosure and interpretation of scientific data which were and remain matters of legitimate debate in the scientific community." ICN still faces a class action shareholders' suit filed in 1987 in New York federal court. The case was dismissed a month ago, ICN said, but has been refiled. The company continues to maintain that the shareholders' suit is "without merit."
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