US drug maker Barr tipped as Galen suitor

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The Independent Online

Shares in Galen surged yesterday after the Northern Irish group became the latest drug maker to admit it was in takeover talks. A bid could value the company at up to £1.5bn.

City sources tipped Barr Laboratories, the generics drug maker listed on the NYSE and based at Woodcliff Lake, New Jersey, as the most likely predator, although other names in the frame include Akzo Nobel, the Dutch chemicals and pharmaceuticals group, and Germany's Schering.

Galen, a women's healthcare specialist, was forced to issue a statement after its stock jumped 11 per cent earlier this week. Its shares climbed 16 per cent yesterday to 737.5p."The company is currently in preliminary discussions which may or may not lead to an offer," Galen said, advising shareholders to "take no further action at this time". It declined to comment on the identity of its stalker.

Analysts said Galen would be a good fit with Barr, which has been extending its share of the women's healthcare market.

Takeover fever has gripped the pharmaceuticals sector in the past few months, with British Biotech falling to Vernalis, Powderject yielding to Chiron of the US and OGS succumbing to a hostile bid from Celltech.

Galen had a rough 2002, knocked sideways by fears over the safety of hormone replacement therapy, one of its key products. But shares in the company have recovered over the past few months, outpacing rivals by more than 60 per cent.

Galen has been focused on the US, where it generates 80 per cent of its sales, since acquiring Warner Chilcott in 2000. The deal prompted the disposal of Galen's contract research business and sparked its reinvention as a niche player in the female health, urology and skincare market. It bought two birth-control pills, Estrostep and Loestrin, and the hormone therapy Femhrt from Pfizer in March for $484m and last year paid $295m for Eli Lilly's Sarafem, a treatment for severe pre-menstrual tension.

Although Galen has performed strongly this year, reporting a doubling of pre-tax profits in its first quarter to $20.4m, analysts have questioned whether the rate of growth is sustainable. Many of its leading products are threatened by cheap imitations and a number of its patents are due to be challenged in the US courts early next year.

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