Within Yugoslavia's aspiring Serbian business community, Milan Panic is a folk hero. Not only did he escape the shackles of Communism early by defecting to the U.S. in 1955, but he also transformed himself into a millionaire pharmaceutical executive--perhaps the richest Serbian in the world. "He's a well-known and very popular name in Belgrade," says Nebojsa Vujovic, first secretary of the Yugoslavian Embassy in Washington. "He possesses a vast knowledge of the working market economy."
Too vast, in the opinion of some federal regulators and Wall Street investors. On the way to building ICN Pharmaceuticals Inc. into a $460 million international drug company, Panic (pronounced PAHN-ish) has been investigated twice by the Securities & Exchange Commission for securities-law violations. And last year, he settled a civil action brought by the U.S. Justice Dept. alleging that ICN overstated the potential of one of its compounds as an AIDS drug. Neither he nor ICN has admitted guilt in any of these cases. Some investors defend the 62-year-old Panic as an aggressive visionary. But his management has spurred numerous shareholder suits, and his own board has censured him for misuse of corporate assets (table). Panic was unavailable to be interviewed for this article.
Now, Panic has managed to wrap controversy and his Serbian heritage into a single package: The ruling Socialist party in what's left of Yugoslavia--Serbia and Montenegro--wants to draft him as the nation's Prime Minister to help stabilize the economy and stave off Western military intervention. It's unlikely he would accept--it would jeopardize his hard-won U.S. citizenship and run counter to sanctions enacted against Yugoslavia in May by the U.S. and U.N. Both have expressed outrage over Serbian efforts to cut off humanitarian relief into Sarajevo, the besieged capital of rival Bosnia and Herzegovina. Nevertheless, Panic is likely to play some role in resolving the feud. Indeed, ICN's future may depend on it.
The reason: In the past year, Panic's business has become increasingly tied to Yugoslavia's uncertain future. In May, 1991, ICN's drug-manufacturing and marketing subsidiary, SPI Pharmaceuticals Inc., bought 75% of Yugoslavia's biggest drug company, Galenika. In just eight months, the successful new unit accounted for 61% of SPI's 1991 revenues of $364 million, and 96% of its $53 million net profit. Meanwhile, Panic has signed letters of intent to set up similar joint ventures in Russia and Poland, while searching for other opportunities in Eastern Europe, particularly in Hungary. ICN's stock has responded well to all the good news, and the company's board rewarded Panic for his efforts with a special stock bonus valued at $5.4 million.
RAGS TO RICHES. Problem is, ICN Galenika has become a victim of Yugoslavia's civil war. The company, which supplies penicillin to much of the country, imports roughly two-thirds of its raw materials from the U.S.--supplies that have been blocked by the sanctions. ICN is busily lobbying for an exception based on its status as a pharmaceutical company, a possible outcome. But two rounds of currency devaluations already have depressed the joint venture's value, and Serbia's hyperinflationary economy bodes poorly for any business there.
Panic, of course, has lived by his wits for a long time. A chemist by training and a Yugoslavian national bicycling champ, he defected to the West on the way to a race in the Netherlands, when he was 25 years old. He eventually made his way with his family to California and, in 1960, established a company called International Chemical & Nuclear with $200 and an old washing machine. The latter, according to company lore, was used as a centrifuge to extract DNA from salmon sperm.
ICN is a far different company from the one that Panic had envisioned. Then, he had hoped to harness the secrets of DNA, whose double-helix structure had been unraveled in the mid-1950s. His goal was to uncover a whole new set of therapeutic drugs and build a world-class pharmaceutical company. To get there, though, he knew he needed cutting-edge research and a worldwide network to market the results. "He had the same sort of vision that's standard dogma among biotech companies today," says veteran drug analyst Samuel D. Isaly of New York's Mehta & Isaly. "But he was 20 years ahead of them."
In his zeal to build his company, Panic quickly became known as a promoter rather than a visionary. And by the early '80s, only the antiviral agent ribavirin, brand named Virazole, had emerged from the company's grandly titled Nucleic Acid Research Institute. Otherwise, ICN was mostly a ragtag collection of acquisitions, selling everything from generics to laboratory supplies. To raise enough cash to continue developing Virazole, and to keep the company afloat, Panic was forced to carve up ICN into three units, taking each one public. Now, ICN is simply a holding company.
Virazole was approved by the Food & Drug Administration at the end of 1985, but only to treat an unusual respiratory disease in infants. Rumors that the FDA was considering Virazole as an AIDS treatment, however, sent the share prices of ICN and its subsidiaries soaring. Panic used the opportunity to sell $13 million worth of his holdings in the companies, prompting a raft of shareholder lawsuits that still are unsettled. Soon, the FDA pressured ICN to recall promotional material that accompanied Virazole's initial, limited approval. And after a January, 1987, press conference, where ICN disclosed studies that it said demonstrated Virazole's effectiveness in delaying the onset of AIDS in patients with HIV, the SEC launched its own investigation. By 1989, ICN finally gave up the fight for AIDS approval in the U.S., writing off $57 million in goodwill related to Virazole and posting a loss of $82 million. Last year, the company paid a $600,000 fine to settle with the FDA and signed an SEC consent decree.
RAINMAKER. Panic's problems in Washington, however, hardly diminished his clout in political circles, where he has long been an effective rainmaker. Board members have included Robert H. Finch, onetime Nixon Administration cabinet member; Birch E. Bayh, the former Indiana senator; and Jerry Brown, the former governor of California. Panic has raised money for Bayh and Brown, and Brown lobbied a California representative to intercede with the FDA during the Virazole crisis. In 1988, Panic also held a $1,000-a-plate dinner at his luxurious Pasadena, Calif., mansion to raise support for then-Presidential contender Michael S. Dukakis.
Panic's ties are augmented by those of ICN-Galenika's vice-chairman, former U.S. Ambassador to Yugoslavia John D. Scanlan. State Dept. sources figure such ties are just what the Yugoslavs want in courting Panic. As the civil war drags on, the Serbs are becoming ever more isolated. On June 23, Secretary of State James Baker III announced tighter U.S. sanctions and said he would no longer formally receive the Yugoslavian ambassador. "There is a public-relations effort to do something about the Serbians' American connection," says one State Dept. expert on Yugoslavia. "The leaders in Belgrade see the Croats as having very strong ties to the U.S."
Longtime Panic adviser Lester B. Korn, founder of executive-search firm Korn/Ferry International, sees his controversial friend this way: "When you put someone as entrepreneurial and charismatic as Milan into a highly regulated industry, you may get some problems. But despite the controversy, I've never had any doubts about his basic ethics." Adds ICN's outside counsel, Arnold I. Burns, a former deputy U.S. attorney general: "He's a guy that loves the game, loves each new challenge." So far, Panic has met most of them. But winning friends for his native Serbia in the West and pulling his company out of the fire in Yugoslavia could prove a lot tougher than maneuvering on Wall Street or in Washington.
ICN'S CONTROVERSIAL RECORD 1970 Stock jumps after ICN says it will market L-dopa--the Parkinson's disease drug. It buys several companies with stock before news of L-dopa side effects deflates stock price. Some previous owners of the businesses get refunds 1977 ICN signs consent decree with Securities & Exchange Commission after SEC charges it gave out misleading financial projections. Company does not admit guilt, but shareholder suits ensue 1979 In response to a shareholder suit, an audit committee of ICN's board forces Chairman Milan Panic to reimburse company $123,000 for, among other things, personal use of a company-owned jet and house in Lake Tahoe, Calif. 1987 ICN reports its drug Virazole is effective in slowing the onset of AIDS. Food & Drug Administration says tests are inconclusive. FDA and SEC investigate 1991 ICN pays the FDA $600,000 to settle Justice Dept. charges surrounding the promotion of Virazole and signs another SEC consent decree. Company never admits guilt DATA: BW