Lawsuit Contends ICN Withheld Information on Virazole : Courts: Firm’s chairman sold stock after FDA rejected Virazole as hepatitis treatment and before public was told, shareholder says.

COSTA MESA — An angry shareholder has sued ICN Pharmaceuticals Inc., alleging that the company withheld information that its drug, Virazole, was rejected by the Food and Drug Administration last fall as a treatment for hepatitis C.

Additionally, the suit accuses company Chairman Milan Panic of profiting by selling a portion of his ICN stock in the months between the time the company was notified of the government’s rejection and when it released that information to the public.

“It is a clear-cut case of insider trading,” said Alan Schulman, the San Diego attorney who filed the class-action suit Tuesday in U.S. District Court in Santa Ana on behalf of ICN shareholder Barbara Yates. Schulman said the suit seeks to recoup money lost by those who purchased stock from Nov. 29 through last week.

ICN spokesman David Calef declined comment on the lawsuit, saying the company had not seen a copy of the filing.

CDA/Investnet, a Ft. Lauderdale, Fla., firm that monitors stock activity by a company’s senior executives, confirmed that Panic sold a total of 55,000 ICN shares, valued at $1.24 million, on Nov. 29 and Nov. 30 at $22.50 each. Panic still holds 240,611 shares of ICN stock, according to CDA/Investnet.

The lawsuit also alleges that shareholders were misled about ICN’s future prospects because the company did not give them vital information about Virazole’s pending FDA approval until nearly three months after the FDA notified company officials that Virazole would not be approved.

In the weeks between Nov. 29, when company officials spoke with the FDA, and Feb. 17, when the details of the discussions were made public, ICN stock declined significantly.

The shares took their first drop in early December. The company said then that Virazole had been resubmitted to the FDA for further testing, which sent ICN’s per share price down $2.875 to $19.125 a share.

It took another hit last week when the company announced that Virazole would not be approved by the FDA as a treatment for hepatitis C, a highly contagious and potentially fatal liver disease that afflicts about 150,000 Americans annually. The stock lost 23% of its value Friday, closing at $17.38 a share, despite the company’s reassurances it would file a new application with the FDA, this time pairing Virazole with a compound known as interferon, which is an accepted hepatitis B treatment.

Analysts have repeatedly said that the future of ICN depends on FDA approval on the use of Virazole. It is one of ICN’s few proprietary drugs that, if approved for sale in the United States, could dramatically boost the company’s profits.

On Wednesday, ICN stock closed at $15.75 a share, up 37.5 cents in New York Stock Exchange trading.