Shares in Northern Irish drugmaker Galen surged by 17 per cent yesterday after it said it was in talks that could lead to an offer for the company.Galen did not identify the potential bidder but it is believed to be New Jersey-based generics drugmaker Barr Laboratories.
Barr declined to comment on whether it was in talks with Galen but analysts noted it would be a logical move for the US company, which has been building up a generic and branded franchise in the women's healthcare market - one of Galen's core areas along with skincare.
"They have been attempting to build up a branded sales force and the main attraction for an acquirer of Galen would be its sales infrastructure," said Mr Peter Frawley, analyst with Merrion Stockbrokers. However, market sources questioned whether Barr would have the resources for an all-cash bid for Galen, which was valued at £1.4 billion sterling (€1.99 billion) at last night's close, suggesting any offer might include a share element.
Analysts said sector multiples and previous acquisitions in the area would suggest a price in the region of 720-750p per share for Galen, valuing it at between £1.36 billion and £1.4 billion.
In London, its main market, Galen closed 17 per cent higher at 742.5p last night. In Dublin, shares added 16 per cent to €10.59.
However, Davy Stockbrokers noted that, as recently as May last year, the stock was trading comfortably above 700p and just two years ago it was above 800p.
"This was on a revenue and earnings base that was significantly smaller than it is today," Davy said, noting that, in the interim, Galen had spent $654 million (€585 million) on acquisition of products. "It is quite conceivable that an offer price would be in excess of the 800p level," the broker said.
Analysts also said that other interested parties might enter the picture. European players who might be attracted by Galen's strong US sales force could include Dutch group Akzo Nobel and German firm Schering, which also has a strong presence in female hormone therapy.
US players who might be interested in looking at Galen include large-cap companies with a presence in women's healthcare such as Johnson & Johnson and Wyeth, and speciality pharmaceutical companies such as Watson.
Advising shareholders to take no further action at this time, Galen said yesterday that an announcement would be made in due course.
