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ICN Pharmaceuticals, Inc.
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Following is the text of ICN's Quarterly Report mailed to shareholders
on May 15, 2001:
[GRAPHIC OMITTED - LOGO OF ICN PHARMACEUTICALS, INC.]
ICN PHARMACEUTICALS, ICN 1st Quarter Report for the Period Ending
March 31, 2001
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ICN's First Quarter Report 2001
To Our Shareholders:
The first quarter of 2001 marked a strong start to a promising year ahead
for ICN Pharmaceuticals. Notable quarterly achievements include:
o Record first quarter revenues of $199 million
o Pharmaceuticals business up 8 percent
o North America revenues up 42 percent
o Earnings per share above analyst expectations
Operating income was in line with expectations, reflecting a temporary
slowdown in royalties as physicians await regulatory clearance of an
improved combination hepatitis C therapy. Earnings per diluted share for
the first quarter were $0.26 compared to $0.34 in the same period of 2000,
above analyst consensus expectations.
For the first quarter, total revenues, led by strong growth in the
Americas, were $199 million, an increase of 3 percent over the $192 million
reported in the same period of 2000. Excluding royalties and the
biomedicals business, revenues from the company's underlying
pharmaceuticals business increased to $156 million from $144 million, an
increase of 8 percent in the quarter.
Operating income was $41 million compared to $53 million in the first
quarter of last year. Net income in the first quarter was $21 million
compared to $27 million in the first quarter of 2000.
The first quarter effective tax rate increased to 31 percent from 29
percent in the same quarter of last year due to greater income in the U.S.
Research and development expense increased to $6 million, up 59 percent
from the same period last year. Earnings before interest, taxes,
depreciation and amortization (EBITDA) were $59 million.
RIBAVIRIN ROYALTIES
Royalties from Schering-Plough's sales of REBETRON combination therapy for
chronic hepatitis C were $28 million in the quarter, compared to $33
million in last year's first quarter. As previously announced, a temporary
slowdown in ribavirin royalties exists as physicians await marketing
authorization, pending FDA review and clearance, for the use of pegylated
interferon with ribavirin. ICN's ribavirin is sold in capsule form as
REBETOL, a component of REBETRON.
Schering-Plough announced in February 2001 that it had filed an application
with the U.S. FDA for approval to market PEGINTRON (an improved interferon)
in combination with ribavirin for the treatment of chronic hepatitis C in
patients not previously treated with interferon alpha who have compensated
liver disease and are at least 18 years of age. The application has been
granted Priority Review Status by the FDA. In March 2001, Schering-Plough
announced that it had received centralized marketing authorization for
PEGINTRON and REBETOL combination therapy for the treatment of both
relapsed and naive hepatitis C patients in the European Union.
First quarter revenues for the Americas Group (North and Latin America
operations) increased to $68 million from $59 million, an increase of 16
percent. Revenues for the company's International Group (Western, Eastern
Europe, and Asia, Africa, Australia operations) increased to $88 million
from $85 million, up 3 percent. The Biomedicals Group's revenues remained
unchanged at $15 million.
AMERICAS GROUP
North America 2001 first quarter revenues increased to $42 million from $30
million in the first quarter of 2000, an increase of 42 percent. Operating
income increased to $18 million from $15 million in 2000, an increase of 26
percent.
North American sales benefited from strong gains in sales of skin care
products, which include Efudex, used to treat actinic keratosis, a
pre-cancerous skin condition. Sales of lasers, used for anti-aging, and the
acquisition of a laser marketing and sales operation, contributed to the
U.S. performance.
In the Latin America region, revenues were $26 million in the first
quarter, compared to $29 million in the first quarter of 2000. The decline
in revenues reflected a change in distributor inventory levels and a change
in the value added tax in Mexico, which affected health care expenditures
in the country. Somewhat offsetting the decline was a 46 percent increase
in sales, to $4 million, in Argentina.
INTERNATIONAL GROUP
Revenues in Western Europe increased to $53 million from $47 million in
last year's first quarter, an increase of 12 percent. Operating profit of
$4 million for the quarter included a charge of approximately $2 million
for the reduction of 589 manufacturing and administrative positions in
Hungary and Poland. Absent this charge, operating income would have been
comparable to last year.
Spain, where sales were 10 percent ahead of last year's first quarter, saw
continued sales growth of the anti-osteoporotic Calcitonina (calcitonin)
and the anti-ulcer product Nuclosina (omeprazole). Sales in Germany
benefited from higher sales of the gastro-intestinal Tepilta and the sleep
hypnotic Remestan, as well as the hypnotic Dalmadorm. Sales of the
antifungal Ancotil and the antiviral Virazole were higher in the United
Kingdom.
Sales in Poland were 34 percent ahead of last year's first quarter, the
result of product sales increases across the board. Sales in the Czech
Republic were higher, resulting from the launch of the antidepressant
Anxiron, and expanded sales of Kalnormin (potassium) mineral supplement.
First quarter revenues in Eastern Europe were $24 million versus $27
million a year earlier. Sales of Russia's 10 leading products rose
substantially in the quarter, with gains recorded for the analgesics, the
multivitamin Oligovit, and Nitrocor nitroglycerin.
Russian sales of products from Solco, ICN's Swiss subsidiary, contributed
$1.4 million in the quarter. Representatives sales offices in Belorussia
and Ukraine opened. During the quarter, the company continued to invest in
marketing and direct retail selling to expand its retail business and
over-the-counter brands.
The Asia, Africa and Australia region revenues of $11 million were
unchanged for the quarter. Operations were affected by the pharmaceutical
industry-mandated withdrawal from the market of Eskornade, a cough and cold
product, which contains the active ingredient PPA (phenylpropanolamin).
Operating profit of $1 million was also unchanged for the quarter. Sales of
Nyal, cough and cold medicine, in Australia, increased 18 percent.
RESEARCH & DEVELOPMENT
In the quarter, research and development spending increased to $6 million
from $4 million. Total research and development spending in the quarter was
$13 million, which included capital expenditures. The company continued to
accelerate its research and development program. Phase I clinical studies
of Levovirin, a potential successor to ribavirin, were started in February
in the treatment of hepatitis C.
The anticancer drug Tiazofurin intravenous was granted Orphan Drug Status
Designation by the U.S. FDA for the indication of chronic myelogenous
leukemia with blast crisis. In addition, ribavirin (Virazole) intravenous
was granted Orphan Drug Status Designation in the European Union for the
indication of hemorrhagic fever with renal syndrome.
Post-marketing clinical studies in hematology and oncology wards in
Germany, UK, Holland and France were started with Ancotil (fluconazole) in
the treatment of secondary fungal infection in bone marrow transplant
patients.
RESTRUCTURING
We reported progress in our plan to enhance shareholder value by splitting
into three separate entities, subject to market conditions: a biotechnology
company, Ribapharm; ICN International, to be comprised of the Western and
Eastern Europe, and Asia, Africa and Australia businesses; and ICN
Americas, to be comprised of the North and Latin American businesses. In
the quarter, draft circulars were filed for listing up to 40 percent of ICN
International on the Budapest and London Stock Exchanges.
2001 will prove to be an exciting year for ICN Pharmaceuticals. Our
research pipeline is progressing. Our restructuring strategy is in
progress. Our regional operations are healthy to maintain strong sales for
our products. New developments on the hepatitis C front encourage a strong
international position for ribavirin and an increased royalty stream. As we
continue to work toward building value for the future of our company and
our shareholders, your continued support is appreciated.
Sincerely,
Milan Panic
Chairman and Chief Executive Officer
ICN Pharmaceuticals, Inc.
Consolidated Condensed Statements of Income for the Quarter Ended
March 31, 2001 and 2000 (unaudited)
In thousands, except per share data 2001 2000
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Revenues $ 198,969 $ 192,340
Cost of product sales 69,774 60,766
Selling, general and administrative
expenses 73,419 67,435
Research and development costs 6,372 4,001
Amortization of goodwill and intangibles 8,206 7,573
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Income from operations 41,198 52,565
Translation and exchange losses, net 400 1,591
Interest, net 10,777 12,526
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Income before provision for income
taxes and minority interest 30,021 38,448
Provision for income taxes 9,263 11,111
Minority interest (264) (62)
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Net income $ 21,022 $ 27,399
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Diluted earnings per common share $0.26 $0.34
Shares used in per share computation 82,304 81,622
Consolidated Condensed Balance Sheets (unaudited)
In thousands March 31, 2001 December 31, 2000
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Assets
Current assets $ 538,979 $ 565,416
Fixed assets, intangibles and
other, net 928,121 911,656
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$1,467,100 $1,477,072
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Liabilities and Stockholders' Equity
Current liabilities $ 153,674 $ 158,777
Long-term debt, less current portion 510,643 510,781
Deferred income and other liabilities 35,144 40,988
Minority interest 9,589 9,332
Stockholders' equity 758,050 757,194
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$1,467,100 $1,477,072
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[GRAPHIC OMITTED - LOGO OF ICN PHARMACEUTICALS, INC.]
ICN Pharmaceuticals, Inc.
Corporate Headquarters
ICN Plaza
3300 Hyland Avenue
Costa Mesa, CA 92626
ICN is on the Internet @ www.icnpharm.com
THE "SAFE HARBOR" STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM
ACT OF 1995. This document contains forward-looking statements that involve
risks and uncertainties, including but not limited to, projections of
future sales, operating income, returns on invested assets, regulatory
approval processes and other risks detailed from time to time in the
Company's Securities and Exchange Commission filings.