Shares in the Northern Ireland-based pharmaceutical group, Galen, took a pasting yesterday as it pledged to continue a patent battle over its recently purchased Sarafem drug. The group confirmed its intention to challenge a bid by Teva Pharmaceuticals to initiate a generic version of Sarafem, a type of Prozac used to treat pre-menstrual syndrome.
The shares, traded in London and Dublin, slipped sharply lower yesterday as investors nervously assessed the news. In London, they slumped to £4.32 sterling (€6.66) down 10.8 per cent. In Dublin, they shed 89 cent to end at €6.60. Some details of a possible legal action against Teva were disclosed when Galen bought the rights to Sarafem from US pharmaceutical giant Eli Lilly in December 2002. Further information on the potential patent challenge were mentioned in documents filed with the US regulators yesterday.
The fall in share value was in reaction to the filing although some analysts, together with Galen executives, believe investors may have over-reacted to the latest news. Mr David Kelly, vice-president of Galen's corporate finance division, said the group had completed extensive work on the potential for a patent challenge during its due diligence examination ahead of the purchase last year. "We are fairly happy that we will be able to defend it fairly robustly," he said.
Mr Ian Hunter, an analyst at Goodbody Stockbrokers, described yesterday's fall as a "knee-jerk" reaction to the filing that may have been overdone. Mr Hunter said any patent challenge would not have any effect on the group's earnings.
Mr Kelly estimates that a legal action in relation to Sarafem could cost $1-$2 million over three years. Sarafem is protected by patents until 2005 and under others until 2007. Galen bought the sales and marketing rights for the drug for €292.5 million last year. At that time, sales of the drug were worth €84.3 million.
The Northern Ireland-based group intends to pursue a different sales strategy for Sarafem than than that pursued by Eli Lilly introducing it as part of its women's healthcare range.
Galen's main business is in the supply of pharmaceutical products, chiefly for prescription use in the women's healthcare sector in the US through its Warner Chilcott subsidiary.
