This Biotech Could Get Swallowed

Consolidation in biotech is picking up. That's one reason Ribapharm (RNA ) may be gobbled up by ICN Pharmaceuticals (ICN ), which already has 80% of the Big Board-listed company. Ribapharm owns the license to antiviral Ribavarin, which Schering-Plough (SGP ) markets as part of its hepatitis C therapies. ICN spun off to the public 20% of Ribapharm, at 10 a share, on Apr. 12, 2002. Since then, the stock has dropped to 4.60 a share. ICN's original plan was to eventually sell all of Ribapharm. But with the stock's sharp drop, ICN may buy the rest at its depressed price, says Joe Cornell of Spin-Off Advisors, a research outfit specializing in spin-offs and buyouts. ICN raised $260 million when it took Ribapharm public. Even if ICN offers a 20% premium, it would pay only about $157 million, figures Cornell. He notes that Ribapharm has cash of $65 million, plus $109 million in royalties due from Schering-Plough. And Ribapharm is profitable. Analyst Andrew Gitkin of USB Warburg, who rates the stock a hold, expects earnings of 74 cents, up from 2002's 48 cents.

By Gene G. Marcial

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