By Mary Welch

Politics and international intrigue are swirling around ICN Pharmaceuticals Inc., as the company maneuvers to regain its manufacturing plant in Yugoslavia, seized Feb. 9 by heavily armed Serbian police and paramilitary troops acting on the orders of the government there.

ICN¿s chairman and CEO, Milan Panic, is a former premier of Yugoslavia. He served six months in 1992, before he was ousted by the current president of the Federal Republic of Yugoslavia, Slobodan Milosevic.

An official in the U.S. State Department, who asked not to be identified, said the ICN takeover was ¿a real attack against Panic, and his efforts to democratize the country. He could be elected president one day, and this is an effort to squash him.¿

More than 200 soldiers took over the ICN Yugoslavia plant in Belgrade, arresting several local managers ¿ including the unit¿s general counsel ¿ and informing ICN that its 75 percent ownership had been reduced to 35 percent.

According to ICN, which is based in Costa Mesa, Calif., but has operations in North America, Latin America, Europe and the Pacific Rim countries, several workers were roughed-up during the takeover. Former general manager Ljubisav Rakic, 69, sustained injuries when pushed and choked, the company said. Serbian police allegedly entered and searched the homes of three ICN vice presidents.

Some press reports said workers taunted the government¿s representatives, calling them ¿red gangsters¿ and demanding they leave the premises.

More than 2,000 workers have signed pledges of solidarity and refused to work until the plant is returned to ICN, the company said. The new, government-appointed plant director said production has resumed, but acknowledged that half of the 3,500-member work force signed pledges in support of Panic. ICN executives met this week in Montenegro to discuss a plan of action for the facility.

Montenegro and Serbia make up the Federal Republic of Yugoslavia, but Montenegro is moving more toward democracy than Serbia. Miomir Mugosa, Montenegro¿s minister of health, said the takeover of ICN ¿threatened the health of citizens, privatization and foreign investment in Yugoslavia.¿

ICN said it would establish a representative office in Belgrade; expand its activities at ICN Montenegro; and develop protective measures for the company¿s Yugoslav employees.

¿A lot is being done,¿ said the State Department official. ¿We have given the Yugoslavian government our strongest condemnation over the takeover of ICN Yugoslavia, and [we] demand a cessation of actions against ICN. We will continue to press the issue at the highest levels.¿

The State Department believes the government¿s actions are ¿extremely suspicious,¿ the official told BioWorld Today.

Milan Panic, a naturalized American, started ICN in 1960 with $200; today its sales volume is nearing $1 billion. He is a leader of The Alliance for Change, a broadly based group that represents advocates of democracy throughout Serbia, including nine Serbian opposition parties and several citizens¿ alliances.

Plant Acquired In 1991 Purchase Of Galenika

ICN acquired the Belgrade plant in 1991 by purchasing 75 percent of Galenika Pharmaceuticals for $270 million from the Serbian government, privatizing the company by issuing stock to more than 5,000 employees. The state retained the remaining 25 percent.

ICN Yugoslavia, a subsidiary of ICN, is one of the largest pharmaceutical companies in the Balkan region and the largest in Yugoslavia.

According to ICN, in July, the government defaulted on about $39 million of its notes payable to ICN and notified ICN that it could no longer honor the terms of all credit agreements. The two parties said they would work together to renegotiate terms of the deal.

ICN said the Serbian government also owes ICN an aggregate of more than $175 million for medicines provided to the state healthcare system, but Serbia contends ICN underpaid it in 1991 ¿ and, the government said, the seizure of the Belgrade plant and subsequent ¿increase¿ of Serbia¿s ownership position is merely an attempt to correct the initial underpayment.

The state department official said it is ¿clear to us that Milosevic¿s government is trying to avoid paying ICN $175 million, as well as trying to weaken Panic, who clearly is the area¿s leading opposition leader.¿

ICN Filing Suits In Washington, Paris

In a lawsuit filed Feb. 10 in U.S. District Court in Washington, D.C., ICN charges the Serbian government owes $176 million. ICN also is seeking more than $500 million for the loss of majority ownership of ICN Yugoslavia and for loss of future revenues (including those that would have flowed to ICN from the Yugoslav government, above the amount already owed). The complaint also seeks a declaration that the ownership transfer is null and void.

ICN intends to file a lawsuit in arbitration court for damages in Paris, the city where the two parties agreed to take any disputes when the plant was bought by ICN.

¿We understand that nobody was [seriously] hurt in the takeover, but a lot of accounting documents were taken,¿ said the State Department official. ¿The [Serbian] government is saying that ICN owes it more than $220 million because of patents and other such things. We see nothing to support that. It is not a U.S. company, nor is it a fully U.S. subsidiary.¿

After the seizure, Panic called upon the U.S. government to ¿condemn this arbitrary seizure and nationalization of American property and the humiliation and violation of the human rights of ICN employees in Serbia.¿

Describing the takeover as a ¿brazen and unlawful move,¿ Panic said there could be ¿no doubt that this was an economic and politically motivated power play, intended to foment anti-American sentiment on the eve of the Kosovo peace talks in France.¿

ICN is the leading pharmaceutical company in Eastern Europe and Russia, with 1997 sales of $433 million. ICN¿s total Eastern European investment is about $400 million, of which $35 million has been invested in Montenegro.

ICN¿s stock (NYSE:ICN) closed Wednesday at $22.25, down $0.875. n