REGISTRATION NO. 333-13243
PURSUANT TO RULE 424B(3)
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PROSPECTUS
ICN PHARMACEUTICALS, INC.
213,385 SHARES OF COMMON STOCK
This Prospectus relates to 213,385 shares (the "Shares")
of Common Stock, $ .01 par value, including associated
Preferred Stock Purchase Rights (the "Common Stock), of ICN
Pharmaceuticals, Inc., a Delaware corporation (the "Company" or
"ICN"), that may from time to time be sold by the Stockholders
identified herein (the "Selling Stockholders"). The Company
will not receive any of the proceeds from the sale of the
Shares. However, under certain circumstances, the Selling
Stockholders will be required to pay to the Company the amount,
if any, by which the proceeds from the sale of their Shares
exceeds certain agreed upon price thresholds. Conversely,
under certain circumstances, the Company will be required to
pay each Selling Stockholder the amount, if any, by which the
proceeds from the sale of such Selling Stockholders Shares is
less than certain agreed upon price thresholds. The Company has
agreed to bear all expenses (other than selling commissions and
fees and expenses of counsel and other advisors to the Selling
Stockholders) in connection with the registration and sale of
the Shares being offered by the Selling Stockholders. See
"Selling Stockholders" and "Plan of Distribution."
The Shares may be sold from time to time by the Selling
Stockholders. Such sales may be made in the over - the -
counter market, on the New York Stock Exchange or other
exchanges (if the Common Stock is listed for trading thereon),
or otherwise at prices and at terms then prevailing, at prices
related to the then current market price or at negotiated
prices. The Shares may be sold by any one or more of the
following methods: (a) a block trade in which the broker or
dealer so engaged will attempt to sell the securities as agent
but may position and resell a portion of the block as principal
to facilitate the transaction; (b) purchases by a broker or
dealer as principal and resale by such broker or dealer for its
account; (c) ordinary brokerage transactions and transactions
in which the broker solicits purchasers; and (d) privately
negotiated transactions. In addition, any Shares that qualify
for sale pursuant to Rule 144 may be sold under Rule 144 rather
than pursuant to this Prospectus.
The Shares covered by this Prospectus were originally
issued to the Selling Stockholders in a private placement made
by the Company under Rule 4(2) of the Securities Act of 1933,
as amended (the "Securities Act"), in connection with the
acquisition by the Company of the Cappel division ("Cappel") of
Organon Teknika Corporation, a Delaware corporation ("OTC"),
from OTC and its affiliate, Akzo Nobel Pharma International
B.V., a Dutch corporation ("Akzo Nobel Pharma" which together
with OTC constitute the Selling Stockholders). Cappel
manufactures and sells immunochemical reagents used in
biotechnology and biomedical laboratories around the world.
The acquisition of Cappel, together with other acquisitions
consummated by the Company in 1996 and presently proposed
acquisitions which may be consummated by the Company during
1996, do not in the aggregate constitute the acquisition of a
significant business as defined by Regulation S-X promulgated
by the Securities and Exchange Commission (the "Commission").
The Selling Stockholders and any broker-dealers, agents or
underwriters that participate with the Selling Stockholders in
the distribution of the Shares may be deemed to be
"underwriters" within the meaning of the Securities Act and any
commissions received by such broker-dealers, agents or
underwriters and any profit on the resale of the Shares
purchased by them may be deemed to be underwriting commissions
or discounts under the Securities Act.
The Common Stock is traded on the New York Stock Exchange
("NYSE") under the symbol "ICN." On October 4, 1996, the
closing sale price per share, as reported by the NYSE, was
$19.75.
AN INVESTMENT IN THE SHARES OFFERED HEREBY INVOLVES A HIGH
DEGREE OF RISK. SEE "RISK FACTORS."
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
The Date of this Prospectus is October 7, 1996.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and
in accordance therewith files reports, proxy statements and other
information with the Securities and Exchange Commission (the
"Commission"). Such reports, proxy statements and other information
filed by the Company may be inspected and copies obtained (at
prescribed rates) at the public reference facilities maintained by
the Commission in Washington, D.C. at Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549 and at the Commission's Regional
Offices in New York at 7 World Trade Center 13th Floor, New York, New
York 10048 and in Chicago at Citicorp Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661. Copies of such material
may be obtained (at prescribed rates), by writing to the Public
Reference Section of the Commission, Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549. Such material is also
available through the Commission's Web site (http://www.sec.gov).
In addition, such material may also be inspected at the NYSE, 20
Broad Street, New York, New York 10005, on which the Common Stock is
listed.
This Prospectus is part of a Registration Statement on Form S-3
(together with all amendments and exhibits thereto, the "Registration
Statement") filed by the Company with the Commission under the
Securities Act of 1933, as amended (the "Securities Act") with
respect to the Shares. This Prospectus does not contain all the
information set forth or incorporated by reference in the
Registration Statement and the exhibits and schedules relating
thereto, certain portions of which have been omitted as permitted by
the Commission's rules and regulations. For further information with
respect to the Company and the Shares offered hereby, reference is
made to the Registration Statement and the exhibits thereto which are
on file at the offices of the Commission and may be obtained upon
payment of the fee prescribed by the Commission as described above.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following reports and documents filed by the Company with
the Commission pursuant to the Exchange Act are incorporated into
this Prospectus by reference as of their respective dates:
1. Annual Report on Form 10-K for the fiscal year ended
December 31, 1995 as amended by Form 10-K/A-1, dated
April 29, 1996.
2. Quarterly Report on Form 10-Q for the three months
ended March 31, 1996.
3. Quarterly Report on Form 10-Q for the six months ended
June 30, 1996.
4. The description of the Common Stock and associated
Preferred Stock Purchase Rights contained in the
Registration Statement on Form 8-A, dated November 10,
1994.
All reports and other documents filed by the Company pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to
the effective date of this Registration Statement and prior to the
termination of the offering of the Shares pursuant to this Prospectus
(this "Offering") shall be deemed to be incorporated by reference in
this Prospectus and to be a part hereof from the date of filing of
such reports and documents. Any statement contained herein or in a
report or document incorporated or deemed to be incorporated herein
by reference shall be deemed to be modified or superseded for
purposes of this Prospectus to the extent that a statement contained
herein or in any subsequently filed report or document that is or is
deemed to be incorporated by reference herein modifies or supersedes
such statement. Any statement so modified or superseded shall not be
deemed, except as so modified or superseded, to constitute a part of
this Prospectus.
The making of a modifying or superseding statement shall not be
deemed an admission for any purpose that the modified or superseded
statement, when made, constituted a misrepresentation, an untrue
statement of a material fact or an omission to state a material fact
that is required to be stated or that is necessary to make a
statement not misleading in light of the circumstances in which it
was made.
THE COMPANY WILL PROVIDE, WITHOUT CHARGE, TO EACH PERSON TO WHOM
A COPY OF THIS PROSPECTUS IS DELIVERED, ON THE REQUEST OF SUCH
PERSON, A COPY OF ANY OR ALL OF THE REPORTS AND DOCUMENTS
INCORPORATED HEREIN BY REFERENCE (OTHER THAN EXHIBITS THERETO, UNLESS
SUCH EXHIBITS ARE SPECIFICALLY INCORPORATED BY REFERENCE INTO SUCH
REPORTS OR DOCUMENTS). WRITTEN REQUESTS FOR SUCH COPIES SHOULD BE
DIRECTED TO DAVID C. WATT, EXECUTIVE VICE PRESIDENT, GENERAL COUNSEL
AND CORPORATE SECRETARY, ICN PHARMACEUTICALS, INC., 3300 HYLAND
AVENUE, COSTA MESA, CALIFORNIA 92626. TELEPHONE INQUIRIES MAY BE
DIRECTED TO DAVID C. WATT AT (714) 545-0100.
THE COMPANY
On November 1, 1994, the stockholders of ICN Pharmaceuticals,
Inc. ("Old ICN"), SPI Pharmaceuticals, Inc. ("SPI"), Viratek, Inc.
("Viratek"), and ICN Biomedicals, Inc. ("Biomedicals") (collectively,
the "Predecessor Companies") approved the combination of the
Predecessor Companies ("the Merger"). On November 10, 1994, SPI, Old
ICN and Viratek merged into ICN Merger Corp., and Biomedicals merged
into ICN Subsidiary Corp., a wholly-owned subsidiary of ICN Merger
Corp. In conjunction with the Merger, ICN Merger Corp. was renamed
ICN Pharmaceuticals, Inc. For accounting purposes, SPI is the
acquiring company and as a result, the Company reports the historical
financial data of SPI in its financial results. Subsequent to the
Merger, the results of the Company include the combined operations of
all Predecessor Companies.
ICN is a multinational research-based pharmaceutical company
that develops, manufactures, distributes and sells pharmaceutical,
nutrition, research and diagnostic products. The Company pursues a
strategy of international expansion which includes (i) research and
development of proprietary products with the potential to be
significant contributors to the Company's global operations; (ii)
penetration of major pharmaceutical markets by means of targeted
acquisitions; and (iii) expansion in these major markets through the
development or acquisition of pharmaceutical products that meet the
particular needs of each market.
The Company distributes and sells a broad range of prescription
and over-the-counter pharmaceutical and nutritional products in over
60 countries worldwide, primarily in North America, Latin America,
Western Europe and Eastern Europe. These pharmaceutical products
treat viral and bacterial infections, diseases of the skin,
myasthenia gravis, cancer, cardiovascular disease, diabetes and
psychiatric disorders. The Company's leading product is the broad
spectrum antiviral agent ribavirin, which is marketed in the United
States, Canada and most of Europe under the trade name
Virazole(registered trademark). Virazole(registered trademark) is
currently approved for commercial sale in over 40 countries for one
or more of a variety of viral infections, including respiratory
syncytial virus ("RSV"), herpes simplex, influenza, chicken pox,
hepatitis and HIV. In the United States, Virazole(registered
trademark) is approved only for use in hospitalized infants and young
children with severe lower respiratory infections due to RSV.
The Company believes it has substantial opportunities to realize
growth from its internally developed compounds. These compounds are
the result of significant investments in its research and development
activities related to nucleic acids conducted over three decades.
The Company believes that the approval of Virazole(registered
trademark) for the treatment of chronic hepatitis C would be
important to the Company because of the potential size of the chronic
hepatitis C market both in the United States and abroad. On June 1,
1994, a New Drug Application ("NDA") was filed with the United States
Food and Drug Administration (the "FDA") for the use of
Virazole(registered trademark) for the treatment of chronic hepatitis
C in the United States. Similar applications for approval to market
Virazole(registered trademark) for chronic hepatitis C were filed in
the European Union, Canada, Sweden, Norway, Finland, Australia and
New Zealand. Following the submission of the NDA, the FDA raised
serious questions regarding the safety and efficacy of
Virazole(registered trademark). Similar questions were raised by
foreign reviewers. Subsequently, the Company withdrew its NDA for
Virazole(registered trademark) and the applications for
Virazole(registered trademark) submitted in other world markets. On
July 28, 1995, the Company entered into an agreement (described
below) with a subsidiary of Schering-Plough Corporation (collectively
with such subsidiary, "Schering") to license ribavirin
(Virazole(registered trademark)) as a treatment for chronic hepatitis
C in combination with Schering's alpha interferon (the "Combination
Therapy"). The FDA subsequently approved a protocol for the testing
of the Combination Therapy, and Schering is currently conducting
Phase III clinical trials of the Combination Therapy. To obtain FDA
approval of Virazole(registered trademark) for use in Combination
Therapy, the Company and Schering must demonstrate that Combination
Therapy is safer and more effective in treating chronic hepatitis C
than alpha interferon alone. Schering is also testing the
Combination Therapy pursuant to protocols approved by the European
Union. The Company continues to believe that Virazole(registered
trademark) has potential in the treatment of hepatitis C in
Combination Therapy and is taking all steps necessary to capitalize
on its full potential.
Pursuant to an Exclusive License and Supply Agreement (the
"License Agreement") with Schering, the Company licensed ribavirin to
Schering for use in Combination Therapy. The License Agreement
provided the Company an initial non-refundable payment by Schering of
$23,000,000, and future royalty payments to the Company for marketing
of ribavirin, including certain minimum royalty rates. Schering will
have exclusive marketing rights for ribavirin for hepatitis C
worldwide, except that the Company will retain the right to co-market
the drug in the countries of the European Union. In addition,
Schering will purchase up to $42,000,000 in Common Stock upon the
achievement of certain regulatory milestones. Under the License
Agreement, Schering will be responsible for all clinical developments
worldwide.
The Company believes it is positioned to expand its presence in
the pharmaceutical markets in Eastern Europe. In 1991, a 75%
interest was acquired in Galenika Pharmaceuticals, a large drug
manufacturer and distributor in Yugoslavia. Galenika Pharmaceuticals
was subsequently renamed ICN Galenika ("Galenika"). This acquisition
added new products and significantly expanded the sales volume of the
Company. With the investment in Galenika Pharmaceuticals, the
Company became one of the first Western pharmaceutical companies to
establish a direct investment in Eastern Europe. Galenika continues
to be a significant part of the Company's operations although its
sales and profitability have, at times, been substantially diminished
owing principally to the imposition of sanctions on Yugoslavia by the
United Nations. However, in December 1995, the United Nations
Security Council adopted a resolution that suspended economic
sanctions imposed on the Federal Republic of Yugoslavia since May of
1992. The suspension of economic sanctions has enabled Galenika to
resume exporting certain of its product lines to Russia, other
Eastern Europe Markets, Africa, the Middle East and the Far East.
Additionally, during 1995, in pursuing its Eastern Europe expansion
strategy, the Company acquired a 75% interest in Oktyabr, a
pharmaceutical company in the Russian Republic. The Company
subsequently acquired an additional 15% interest in Oktyabr,
increasing its interest in Oktyabr to 90%.
In addition to its pharmaceutical operations, the Company also
develops, manufacturers and sells a broad range of research chemical
products, diagnostic reagents and radiation monitoring services. The
Company markets these products internationally to major scientific,
academic, health care and governmental institutions through catalog
and direct mail marketing programs.
The principal executive offices of the Company are located at
3300 Hyland Avenue, Costa Mesa, California 92626. The telephone
number at such address is (714) 545-0100.
RISK FACTORS
An investment in the Shares involves a high degree of risk and
may not be appropriate for investors who cannot afford to lose their
entire investment. Prospective purchasers of the Shares should be
fully aware of the risk factors set forth herein. This Prospectus
contains or incorporates statements that constitute forward looking
statements within the meaning of the Private Securities Litigation
Reform Act of 1995. Those statements appear in a number of places in
this Prospectus and in the documents incorporated by reference and
include statements regarding, among other matters, the Company's
growth opportunities, the Company's acquisition strategy, regulatory
matters pertaining to governmental approval of the marketing or
manufacturing of certain of the Company's products and other factors
affecting the Company's financial condition or results of operations.
Prospective investors are cautioned that any such forward looking
statements are not guarantees of future performance and involve
risks, uncertainties and other factors which may cause actual
results, performance or achievements to differ materially from the
future results, performance or achievements expressed or implied in
such forward looking known and unknown statements. Such factors
include the various risk factors described below.
DEPENDENCE ON FOREIGN OPERATIONS
Approximately 75% and 79% of the Company's net sales for 1995
and the six months ended June 30, 1996, respectively, were generated
from operations outside the United States. The Company operates
directly and through distributors in North America, Latin America
(principally Mexico), Western Europe and Eastern Europe and through
distributors elsewhere in the world. Foreign operations are subject
to certain risks inherent in conducting business abroad, including
possible nationalization or expropriation, price and exchange
controls, limitations on foreign participation in local enterprises,
health-care regulation and other restrictive governmental actions.
Changes in the relative values of currencies take place from time to
time and may materially affect the Company's results of operations.
Their effects on the Company's future operations are not predictable.
RISK OF OPERATIONS IN YUGOSLAVIA
Galenika represents a material part of the Company's business.
Approximately 46% and 46% of the Company's net sales for 1995 and the
six months ended June 30, 1996, respectively, were from Galenika. In
addition, approximately 39% and 51% of the Company's operating income
for 1995 and the six months ended June 30, 1996, respectively, were
from Galenika. The current political and economic circumstances in
Yugoslavia create certain business risks particular to that country.
Between May 1992 and December 1995, Yugoslavia had been operating
under sanctions imposed by the United Nations which had severely
limited the ability to import raw materials for manufacturing and had
prohibited all exports. While the sanctions were suspended in
December 1995, certain risks such as hyperinflation, currency
devaluations, wage and price controls and potential government action
could continue to have a material adverse effect on the Company's
results of operations.
Galenika is subject to price controls in Yugoslavia. The size
and frequency of government-approved price increases are influenced
by local inflation, devaluations, cost of imported raw materials and
demand for Galenika products. During 1995 and through June 30, 1996,
Galenika received fewer price increases than in the past due to lower
relative levels of inflation. As inflation increases, the size and
frequency of price increases are expected to increase. Price
increases obtained by Galenika are based on economic events preceding
such an increase and not on expectations of ongoing inflation. A lag
in approved price increases could reduce the gross margins that
Galenika receives on its products. Although the Company expects that
Galenika will limit sales of products that have poor margins until an
acceptable price increase is received, the impact of an inability to
obtain adequate price increases in the future could have an adverse
impact on the Company as a result of declining gross profit margins
or declining sales in an effort to maintain existing gross margin
levels.
RISK OF OPERATIONS IN EASTERN EUROPE AND RUSSIA
The Company has an investment in Russia through its 90% interest
in the Russian pharmaceutical company Oktyabr. In May 1996, the
Company purchased a 40% investment in a U.S. company which has a 51%
interest in a joint venture with a joint stock company in Kazakhstan
to convert a former Soviet scientific production complex in
Kazakhstan into a pharmaceutical manufacturing and distribution
plant. It is anticipated that the Company's investment in the joint
venture, including its investment in the U.S. company, will be
approximately $3 million. In June 1996, the Company acquired an
approximately 88% interest in Lekstredstva, a Russian pharmaceutical
company, and intends to make additional purchases from existing
Lekstredstva stockholders to increase its interest to 95%. It is
estimated that the aggregate investment in Lekstredstva will cost
approximately $6.3 million. In September 1996, the Company signed a
definitive agreement to purchase up to a 59% interest in Alkaloida
Chemical Co. ("Alkaloida"), a Hungarian state-owned pharmaceutical
company, for approximately $21.9 million. As required under the
terms of the definitive agreement, on September 27, 1996, the Company
made a payment of approximately $8.95 million for an initial 50.02%
interest in Alkaloida, with the shares representing such interest to
be issued to the Company on October 10, 1996. The remaining 8.98%
interest in Alkaloida is anticipated to be acquired in January 1997.
See "Recent Developments." From July 1996 through the date of this
Prospectus, the Company acquired a 65% interest in Polypharm, a
Russian pharmaceutical company, for approximately $1.3 million. The
Company is also considering several other strategic acquisitions and
investments in Eastern Europe. Although the Company believes that
investment in Russia and Eastern Europe offers access to growing
world markets, the economic and political conditions in such
countries are unstable.
NO ASSURANCE OF SUCCESSFUL DEVELOPMENT AND COMMERCIALIZATION OF
FUTURE PRODUCTS
The Company's future growth will depend, in large part, upon its
ability to develop or obtain and commercialize new products and new
formulations of or indications for current products. The Company is
engaged in an active research and development program involving
compounds owned by the Company or licensed from others which the
Company may, in the future, desire to develop commercially. There
can be no assurance that the Company will be able to develop or
acquire new products, obtain regulatory approvals to use such
products for proposed or new clinical indications in a timely manner,
manufacture its potential products in commercial volumes or gain
market acceptance for such products. In addition, the Company may
require financing over the next several years to fund costs of
development and acquisitions of new products and, if
Virazole(registered trademark) is approved for treatment of chronic
hepatitis C in Combination Therapy (for which there can be no
assurance), to expand the production and marketing of
Virazole(registered trademark) in the countries of the European Union
where the Company has retained marketing rights under the License
Agreement. It may be desirable that the Company enter into licensing
arrangements with other pharmaceutical companies in order to market
effectively any new products or new indications for existing products
such as the License Agreement with Schering for the marketing of
Virazole(registered trademark) for Combination Therapy (if approved).
There can be no assurance that the Company will be successful in
raising such additional capital or entering into such marketing
arrangements, if required, or that such capital will be raised, or
such marketing arrangements will be, on terms favorable to the
Company.
LIMITED PATENT PROTECTION
The Company may be dependent on the protection afforded by its
patents relating to Virazole(registered trademark) and no assurance
can be given as to the breadth or degree of protection which these
patents will afford the Company. The Company has patent rights in
the United States expiring in 1999 relating to the use of
Virazole(registered trademark) to treat specified human viral
diseases. If future development of Virazole(registered trademark) in
Combination Therapy is successful and approval is granted in the
United States, an additional award of exclusivity will be granted of
up to three years from date of approval (Waxman-Hatch Act); however,
there can be no assurance that such development will be successful or
that such approval will be obtained. While the Company has patents
in certain foreign countries covering use of Virazole(registered
trademark) in the treatment of certain diseases, which coverage and
expiration varies and which patents expire at various times through
2006, the Company has no, or limited, patent rights with respect to
Virazole(registered trademark) and/or its use in certain foreign
countries where Virazole(registered trademark) is currently, or in
the future may be, approved for commercial sale, including France,
Germany and Great Britain. However, the Company and Schering intend
to file applications for approval of Combination Therapy through a
centralized procedure in the European Union (which includes France,
Germany and Great Britain). If such approval is granted, the Company
and Schering would be afforded either six or ten years (depending
upon the particular country) of protection for the Combination
Therapy against competition . There can be no assurance that the
loss of the Company's patent rights with respect to
Virazole(registered trademark) upon expiration of the Company's
patent rights in the United States, Europe and elsewhere will not
result in competition from other drug manufacturers or will not
otherwise have a significant adverse effect upon the business and
operations of the Company.
As a general policy, the Company expects to seek patents, where
available, on inventions concerning novel drugs, techniques,
processes or other products which it may develop or acquire in the
future. However, there can be no assurance that any patents applied
for will be granted, or that, if granted, they will have commercial
value or as to the breadth or the degree of protection which these
patents, if issued, will afford the Company. The Company intends to
rely substantially on its unpatented proprietary know-how, but there
can be no assurance that others will not develop substantially
equivalent proprietary information or otherwise obtain access to the
Company's know-how. Patents for pharmaceutical compounds are not
available in certain countries in which the Company markets its
products.
Marketing approvals in certain foreign countries provide an
additional level of protection for products approved for sale in such
countries.
UNCERTAIN IMPACT OF ACQUISITION PLANS
The Company intends aggressively to continue its strategy of
targeted expansion through the acquisition of compatible businesses
and product lines and the formation of strategic alliances, joint
ventures and other business combinations. Should the Company
complete any material acquisition, the Company's success or failure
in integrating the operations of the acquired company may have a
material impact on the future growth or success of the Company.
Since some or all of these potential acquisitions may be affected
with the issuance of Common Stock by the Company to the sellers of
the businesses being acquired, the interest of existing stockholders
in the Company may be diluted (which dilution may be material
depending on the size and the number of acquisitions consummated).
Subject to sufficient authorized and unissued shares of Common Stock
being available, no stockholder approval of any acquisition
transaction would be required unless the number of shares of Common
Stock issued by the Company in connection with the transaction (or
series of related transactions) were to exceed 20% of the then
outstanding shares of Common Stock.
POTENTIAL LITIGATION EXPOSURE
ICN is a defendant in various lawsuits including certain
consolidated class action lawsuits alleging, among other things,
violations of federal securities laws. The plaintiffs in these
lawsuits allege that ICN made, or aided and abetted other defendants
in making, misrepresentations of material facts and omitted to state
material facts concerning the business, financial condition and
future prospects of the Company, primarily concerning developments
regarding Virazole(registered trademark), including statements made
in the 1980's concerning the efficacy and safety of the drug and the
market for the drug in the treatment of AIDS and AIDS related
diseases, and statements made in 1994 and 1995 concerning the
Company's NDA for the use of Virazole(registered trademark) for the
treatment of chronic hepatitis C (the "Hepatitis C NDA"). See
"Recent Developments."
The Commission is conducting a private investigation (the
"Commission Investigation") with respect to certain matters
pertaining to the status and disposition of the Hepatitis C NDA,
including whether, during the period June 1994 through February 1995,
the Company, persons or entities associated with it and others
(including Mr. Milan Panic, Chairman, President and Chief Executive
Officer of the Company), in the offer and sale or in connection with
the purchase and sale of Common Stock, engaged in possible violations
of federal securities laws, by having possibly: (i) made false or
misleading statements or omitted material facts with respect to the
status and disposition of the Hepatitis C NDA; (ii) purchased or
sold Common Stock while in possession of material, non-public
information concerning the status and disposition of the Hepatitis C
NDA; or (iii) conveyed material, non-public information concerning
the status and disposition of the Hepatitis C NDA, to other persons
who may have purchased or sold Common Stock. The Company is
cooperating with the Commission in its investigation.
The Company has received a Subpoena (the "Subpoena") from a
Grand Jury in the United States District Court, Central District of
California requesting the production of documents covering a broad
range of matters over various time periods. The Company and Milan
Panic are subjects of the investigation and are cooperating with the
production of documents pursuant to the Subpoena.
DEPENDENCE ON KEY PERSONNEL
The Company believes that its continued success will depend to a
significant extent upon the efforts and abilities of its management,
including Milan Panic, its Chairman, President and Chief Executive
Officer. The loss of their services could have a material adverse
effect on the Company. The Company cannot predict what effect, if
any, the Commission's Investigation and the Subpoena may have on Mr.
Panic's ability to continue to devote services on a full time basis
to the Company. See " -- Potential Litigation Exposure," above.
POTENTIAL PRODUCT LIABILITY EXPOSURE AND LACK OF INSURANCE
The Company could be exposed to possible claims for personal
injury resulting from allegedly defective products. Even if a drug
were approved for commercial use by an appropriate governmental
agency, there can be no assurance that users will not claim that
effects other than those intended may result from the Company's
products. The Company generally self-insures against potential
product liability exposure with respect to its marketed products,
including Virazole(registered trademark). While to date no material
adverse claim for personal injury resulting from allegedly defective
products, including Virazole(registered trademark), has been
successfully maintained against the Company or any of its
predecessors, a substantial claim, if successful, could have a
material adverse effect on the Company.
GOVERNMENT REGULATION
FDA approval must be obtained in the United States and approval
must be obtained from comparable agencies in other countries prior to
marketing or manufacturing new pharmaceutical products for use by
humans in such respective jurisdictions. Obtaining FDA approval for
new products and manufacturing processes can take a number of years
and involves the expenditure of substantial resources. Numerous
requirements must be satisfied, including preliminary testing
programs on animals and subsequent clinical testing programs on
humans, to establish product safety and efficacy. No assurance can
be given that authorization of the commercial sale of any new drugs
or compounds by the Company for any application will be secured in
the United States or any other country, or that, if such
authorization is secured, those drugs or compounds will be
commercially successful.
The FDA in the United States and other regulatory agencies in
other countries also periodically inspect manufacturing facilities.
Failure to comply with applicable regulatory requirements can result
in, among other things, sanctions, fines, delays or suspensions of
approvals, seizures or recalls of products, operating restrictions
and criminal prosecutions. Furthermore, changes in existing
regulations or adoption of new regulations could prevent or delay the
Company from obtaining future regulatory approvals.
The Company is subject to price control restrictions on its
pharmaceutical products in the majority of countries in which it
operates. To date, the Company has been affected by pricing
adjustments in Spain and by the lag in allowed price increases in
Yugoslavia and Mexico, which have created lower sales in U.S. dollars
and reductions in gross profit. Future sales and gross profit could
be materially affected if the Company is unable to obtain price
increases commensurate with the levels of inflation.
COMPETITION
The Company operates in a highly competitive environment. The
Company's competitors, many of whom have substantially greater
capital resources and marketing capabilities and larger research and
development staffs and facilities than the Company, are actively
engaged in marketing products similar to those of the Company and in
developing new products similar to those proposed to be developed and
sold by the Company. Others may succeed in developing products that
are more effective than those marketed or proposed for development by
the Company. Progress by other researchers in areas similar to those
being explored by the Company may result in further competitive
challenges. In early 1996, MedImmune, Inc. began marketing in the
United States RespiGam(registered trademark), a prophylactic drug for
the treatment of RSV. The Company is aware of several other ongoing
research and development programs which are attempting to develop new
prophylactic and therapeutic products for treatment of RSV. Although
the Company will follow publicly disclosed developments in this
field, on the basis of currently available data, it is unable to
evaluate whether RespiGam(registered trademark) or the other
technology being developed in these programs poses a threat to the
Company's current market position in the treatment of RSV or its
revenue streams. The Company may also face increased competition
from manufacturers of generic pharmaceutical products when certain of
the patents covering certain of its currently marketed products
expire.
RECENT DEVELOPMENTS
ICN has been a defendant in certain consolidated class action
lawsuits pending in the United States District Court for the Southern
District of New York entitled In re PaineWebber Securities Litigation
(Case No. 86 Civ. 6776 {BMW}) and In re ICN/Viratek Securities
Litigation (Case No. 87 Civ. 4296 {BMW}). The plaintiffs in these
lawsuits have alleged that ICN made, or aided and abetted other
defendants in making, misrepresentations of material facts and
omitted to state material facts concerning the business, financial
condition and future prospects of the Company, primarily concerning
developments regarding Virazole(registered trademark), including
statements made in 1986 and 1987 concerning the efficacy and safety
of the drug and the market for the drug in the treatment of AIDS
related conditions. On August 22, 1996, following a trial on the
merits, the jury sitting for such trial rejected a number of the
securities fraud claims brought against ICN. The jury was unable to
reach a verdict on the remaining claims and accordingly, a mistrial
was declared on those claims. There were no findings of violations
of securities laws and no damages were awarded. With respect to the
claims rejected by the jury, the plaintiffs have a right to appeal,
and with respect to the claims for which the jury was unable to reach
a verdict, the plaintiffs have a right to a retrial.
On September 18, 1996, the Company acquired Cappel from the
Selling Stockholders in consideration for the issuance of 213,385
Shares. Cappel manufactures and sells immunochemical reagents used
in biotechnology and biomedical laboratories around the world. The
acquisition of Cappel, together with other acquisitions consummated
by the Company in 1996 and presently proposed acquisitions which may
be consummated by the Company in 1996, do not in the aggregate
constitute the acquisition of a significant business as defined by
Regulation S-X promulgated by the Commission.
On September 25, 1996, ICN China, Inc. ("ICN China") , a wholly-
owned subsidiary of the Company, entered into a joint venture
agreement with Jiangsu Wuxi Pharmaceutical Corporation ("Wuxi"), a
Chinese state-owned company, to establish a limited liability company
(the "Chinese Joint Venture Entity") for the production and sale of
pharmaceutical products. The Chinese Joint Venture Entity will be
owned 75% by ICN China and 25% by Wuxi. Wuxi will contribute its
existing operation to the Chinese Joint Venture Entity, and ICN China
will contribute to the Chinese Joint Venture Entity a total of $24
million in cash over three years, primarily for the construction of a
new pharmaceutical production plant and the purchase of related
machinery and equipment. Of the amount to be contributed by ICN
China, $3.6 million is required to be paid in January 1997, an
additional $4.4 million is required to be paid during 1997, and an
additional $8 million is required to be paid during each of 1998 and
1999. The Company has not determined the source of the financing for
this obligation.
On September 27, 1996, the Company borrowed approximately $8.95
million from Union Bank of Switzerland ("UBS") to finance the initial
purchase of its interest in Alkaloida. See "Risk Factors - Risk of
Operations in Eastern Europe and Russia." This loan, which bears an
initial annual interest rate equal to UBS's one month LIBOR rate plus
0.75%, is repayable on October 27, 1996, with the Company having the
option to extend the term by an additional 30 days. The Company is
presently reviewing alternative arrangements to refinance the loan
upon maturity.
On September 30, 1996, the Company issued an additional 195,122
shares of Common Stock (the "Additional Shares") to Siemens Medical
Systems, Inc. ("Siemens Medical"), a Delaware corporation, in
connection with an amendment (the "Amendment") to the Common Stock
Undertaking Agreement (the "Undertaking Agreement") entered into
between the Company and Siemens Medical at the time of the Company's
acquisition (the "Dosimetry Acquisition") of the Dosimetry Service
Business from Siemens Medical in July 1996. In connection with the
Amendment, Siemens Medical withdrew its previously exercised put (the
"Put Option") to require the Company to repurchase at $23.512493872
per share (the "Guaranteed Share Price") the 964,833 shares of Common
Stock (the "Acquisition Shares") which had been issued to Siemens
Medical in connection with the Dosimetry Acquisition. The Put Option
had been exercised pursuant to the terms of the Undertaking Agreement
as initially executed. The Amendment contains terms which, among
other things, (i) extend the date by which Siemens Medical has the
right to exercise the Put Option to December 16, 1996, (ii) require
the Company to pay interest on the amount paid upon exercise of the
Put Option at an annual interest rate (the "Interest Rate") equal to
one percent plus the prime or reference rate of Bank of America, N.T.
& S.A. for the period from September 28, 1996 through (and including)
December 23, 1996, (iii) require the Company to pay interest at the
Interest Rate to Siemens Medical on the Guaranteed Share Price with
respect to each Acquisition Share sold from September 28, 1996 until
the receipt of the proceeds from such sale, (iv) permit the Company
to require Siemens Medical to sell any or all of the Acquisition
Shares for cash pursuant to transactions arranged by the Company (the
"Arranged Sales") provided that the Company pays Siemens Medical for
each share sold pursuant to an Arranged Sale the positive difference,
if any, between the Guaranteed Share Price and the proceeds, less
Siemens Medical's sales commissions, underwriting discounts, transfer
fees and out-of-pocket expenses (the "Net Proceeds"), received by
Siemens Medical from the sale of such shares, (v) for each share of
Common Stock sold pursuant to an Arranged Sale or repurchased by the
Company pursuant to the Put Option, require the Company to pay
Siemens Medical the positive difference between (A) the lesser of (x)
the highest closing price of a share of Common Stock on the NYSE
between September 28, 1996 and the December 23, 1996 and (y) $28.21
and (B) the Guaranteed Share Price and (vi) to the extent the then
market value (based upon average of the closing prices of the Common
Stock over specified three week periods) of the Additional Shares
(or, to the extent Additional Shares have previously been sold, the
Net Proceeds from such sales) is less than the amount that the
Company would have been seen required to pay if the Put Option was
then exercised, obligate the Company to issue additional shares of
Common Stock to Siemens Medical valued at said market value (which
shares shall be deemed thereafter to constitute Additional Shares).
Upon satisfaction of all of its obligations under the Amendment,
Siemens Medical is required to return to the Company any Additional
Shares not previously sold by it and to remit to the Company the Net
Proceeds from the sale of any Additional Shares. Any Net Proceeds
received by Siemens Medical upon a sale of Additional Shares may, at
the option of the Company, be credited against any payments required
to be made by the Company to Siemens Medical under the Amendment.
USE OF PROCEEDS
Since this Prospectus relates to the offering of Shares by the
Selling Stockholders, the Company will not receive any of the
proceeds from the sale of the Shares offered hereby. However, under
certain circumstances, the Selling Stockholders will be required to
pay to the Company the amount, if any, by which the proceeds from the
sale of their Shares exceeds certain agreed upon price thresholds.
Conversely, under certain circumstances the Company will be required
to pay each Selling Stockholder the amount, if any, by which the
proceeds from the sale of such Selling Stockholder's Shares is less
than certain agreed upon price thresholds. See "Selling
Stockholders."
SELLING STOCKHOLDERS
170,573 Shares are being offered for the account of OTC and
42,812 Shares are being offered for the account of Akzo Nobel Pharma.
Because the Selling Stockholders may sell all or part of the Shares
which they hold pursuant to this Prospectus and because this Offering
is not being underwritten on a firm commitment basis, no estimate can
be given as to the amount of Shares that will be held by the Selling
Stockholders upon termination of this Offering. See "Plan of
Distribution."
As of September 19, 1996, the Company had outstanding
approximately 33,366,000 shares of Common Stock (as adjusted to give
effect to the issuance of 213,385 Shares to the Selling Stockholders
and the 195,122 shares of Common Stock issued to Siemens Medical, as
described under "Recent Developments").
The Selling Stockholders acquired their Shares as consideration
for the Company's acquisition of Cappel. The registration effected
hereby is being effected pursuant to certain registration rights
granted by the Company at the time of the issuance of the Shares.
Pursuant to the terms of the Sale and Purchase Agreement (the
"Cappel Agreement") by and between OTC, Akzo Nobel Pharma, and the
Company, if the aggregate net proceeds (after deducting any broker or
dealer fees, discounts and expenses, and all transfer and other
taxes) (the "Aggregate Net Proceeds") received by the Selling
Stockholders from the sales of Shares to unaffiliated persons in arms-
length transactions during the period ending February 4, 1997 (the
"Protected Period") is less than the sum of (i) the product of the
number of Shares sold during the Protected Period times approximately
$21.01, and (ii) interest on the amount set forth in clause (i) from
September 18, 1996, through the receipt of such proceeds, at a rate
of "Prime" (as defined below) plus 1% (the "Interest Rate") (less any
cash dividends paid on the Shares prior to sale), the Company shall
pay to the Selling Stockholders on a pro rata basis an amount in cash
equal to such shortfall plus interest on such shortfall at the
Interest Rate beginning on the date of such receipt and ending on the
date of payment of such shortfall.
Conversely, if the Aggregate Net Proceeds received by the
Selling Stockholders from the sales of Shares to unaffiliated persons
in arms-length transactions during the Protected Period is greater
than the sum of (i) 115% of the product of the number of Shares sold
during the Protected Period times approximately $21.01, and (ii)
interest on the amount set forth in clause (i) from September 18,
1996, through the receipt of such proceeds at the Interest Rate (less
any cash dividends paid on the Shares prior to sale), the Selling
Stockholders shall pay to the Company an amount in cash equal to such
excess.
"Prime" on any given date will mean the rate published for
such date in the Eastern Edition of the Wall Street Journal in the
section entitled "Money Rates" (or any successor section) and
opposite the caption "Prime Rate" (or any sucessor caption). For
each day which is not a business day in New York, Prime shall be
Prime for the preceding day.
The foregoing description of the Cappel Agreement is a
summary of the terms thereof and is qualified by reference to the
entire text of the Capel Agreement which is attached as an exhibit to
the Registration Statement of which this Prospectus is part and is
incorporated by reference herein.
PLAN OF DISTRIBUTION
The Selling Stockholders are offering the Shares for their own
account, and not for the account of the Company. The Company will
not receive any proceeds from the sale of the Shares by the Selling
Stockholders. However, under certain circumstances, the Selling
Stockholders will be required to pay to the Company the amount, if
any, by which the proceeds from the sale of their Shares exceed
certain agreed upon price thresholds. Conversely, under certain
circumstances the Company will be required to pay each Selling
Stockholder the amount, if any, by which the proceeds from the sale
of such Selling Stockholder's Shares is less than certain agreed upon
price thresholds. See "Selling Stockholders."
The Shares may be sold from time to time by the Selling
Stockholders. Such sales may be made in the over-the-counter market,
on the New York Stock Exchange or other exchanges (if the Common
Stock is listed for trading thereon), or otherwise at prices and at
terms then prevailing, at prices related to the then current market
price or at negotiated prices. The Shares may be sold by any one or
more of the following methods: (a) a block trade in which the broker
or dealer so engaged will attempt to sell the securities as agent but
may position and resell a portion of the block as principal to
facilitate the transaction; (b) purchases by a broker as principal
and resale by such broker or dealer for its account; (c) ordinary
brokerage transactions and transactions in which the broker solicits
purchasers; and (d) privately negotiated transactions. In addition,
any Shares that qualify for sale pursuant to Rule 144 may be sold
under Rule 144 rather than pursuant to this Prospectus.
The Selling Stockholders and any broker-dealers, agents or
underwriters that participate with the Selling Stockholders in the
distribution of the Shares may be deemed to be "underwriters" within
the meaning of the Securities Act and any commissions received by
such broker-dealer, agent or underwriter and any profit on the resale
of the Shares purchased by them may be deemed to be underwriting
commissions or discounts under the Securities Act.
Under the Exchange Act and the regulations thereunder, any
person engaged in a distribution of the Shares offered by this
Prospectus may not simultaneously engage in market making activities
with respect to the Common Stock during any applicable "cooling off"
periods prior to the commencement of such distribution. In addition,
and without limiting the foregoing, such Selling Stockholder will be
subject to applicable provisions of the Exchange Act and the rules
and regulations thereunder including, without limitation, Rules 10b-6
and 10b-7, which provisions may limit the timing of purchases and
sales of Common Stock by such Selling Stockholder.
There can be no assurance that the Selling Stockholders will
sell any or all of the Shares offered by them hereunder. To the
extent required, the Company will use its best efforts to file,
during any period in which offers or sales are being made, one or
more supplements to this Prospectus to describe any material
information with respect to the plan of distribution not previously
disclosed in this Prospectus or any material change to such
information in this Prospectus.
The registration effected hereby is being effected pursuant to
certain registration rights previously granted by the Company to the
Selling Stockholders in the Cappel Agreement. The Company will bear
the expense of such registration, other than selling commissions and
fees and expenses of counsel and other advisors to the Selling
Stockholders.
LEGAL MATTERS
The legality of the Shares offered hereby will be passed upon
for the Company by David C. Watt, Executive Vice President, General
Counsel and Corporate Secretary of the Company. As of September 30,
1996, Mr. Watt beneficially owned 100,332 shares of Common Stock,
including 98,337 shares which he has the right to acquire upon the
exercise of currently exercisable stock options.
INDEPENDENT PUBLIC ACCOUNTANTS
The consolidated balance sheets as of December 31, 1995 and
1994, and the consolidated statements of income, retained earnings
and cash flows for each of the three years in the period ended
December 31, 1995, incorporated by reference in this Prospectus, have
been included herein in reliance on the report, which includes, as it
relates to 1994 and 1993, an emphasis of matter paragraph related to
certain transactions between affiliates, of Coopers & Lybrand L.L.P.,
independent public accountants, given on the authority of that firm
as experts in auditing and accounting. With respect to the unaudited
interim financial information for the periods ended June 30, 1996 and
1995 and March 31, 1996 and 1995, incorporated by reference in this
Prospectus, the independent accountants have reported that they have
applied limited procedures in accordance with professional standards
for a review of such information. However, their separate reports
included in the Company's quarterly reports on Form 10-Q for the
quarters ended June 30, 1996 and March 31, 1996, and incorporated by
reference herein, state that they did not audit and they do not
express an opinion on that interim financial information.
Accordingly, the degree of reliance on their report on such
information should be restricted in light of the limited nature of
the review procedures applied. The accountants are not subject to
the liability provisions of Section 11 of the Securities Act for
their report on the unaudited interim financial information because
that report is not a "report" or a "part" of the Registration
Statement prepared or certified by the accountants within the meaning
of Sections 7 and 11 of the Securities Act.
Any financial statements and schedules hereafter incorporated by
reference in the Registration Statement of which this Prospectus is a
part, that have been audited and are the subject of a report by
independent accountants will be so incorporated by reference in
reliance upon such reports and upon the authority of such firms as
experts in accounting and auditing to the extent covered by consents
filed with the Commission.
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED
TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS, OTHER THAN
THOSE CONTAINED IN THIS PROSPECTUS, IN CONNECTION WITH THIS OFFERING,
AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATION MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY. NEITHER
THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL,
UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN
NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE OF THIS
PROSPECTUS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OR
SOLICITATION BY ANYONE IN ANY STATE IN WHICH SUCH OFFER OR
SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH
OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANYONE TO WHOM
IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
