From Briefing.com:
ICN Pharmaceuticals (ICN): Shortly after being added to our list of Core candidates, ICN fell out of bed. In our original report we noted that the company's exposure to the emerging markets of Eastern Europe added to the risk factor of this stock. Sure enough, when a Yugoslavian government agency announced that it would default on
roughly $39 mln of notes due ICN Yugosalvia, investors headed for the exits. Company has notes receivable from the Yugoslavian government of $176 mln. ICN plans to take a $172 mln charge in Q2 related to its loans to Yugoslavia. However, it should be noted that ex-charges the company expects to meet its earnings estimate of $0.41. Company also in process of renegotiating terms of the debt. In addition to the troubles with Yugoslavia, stock being pressured lower on growing anxieties over Russia's economic woes. In FY97 company derived $134 mln in revenues from Russia. While the stock will remain on the defensive over the next several months (until market gets a better feel on how international events will impact the company's future earnings), Briefing maintains it long-term optimistic outlook for ICN. Its Eastern European strategy is risky short-term, but over the long-term Briefing expects growth in this region to be huge. Company's product lines include anti-infectives, dermatologicals, vitamins, anticholinesterases and vision care. Virazole, the company's leading anti-viral agent, is approved in over 43 countries for at least one of 8 diseases, including HIV. Stock trades at 12.2x estimated FY98 earnings and only 9.7x projected FY99 results, well below the industry and the market. Though we still like the stock long-term, we are lowering our 12-to 18-month price target to 43-45 area (from 60) to reflect the uncertainties created by the economic turmoil in both Yugoslavia and Russia.
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