Regulator investigates Galen deal with US firm

The US competition watchdog is investigating a licensing deal between Dublin and London-listed Galen Holdings and US company Barr Laboratories, which both companies agreed as part of a litigation settlement earlier this year.

In a statement, Galen and Barr said that the competition bureau of the Federal Trade Commission (FTC) had written to both parties asking that they voluntarily provide information on Barr's proposed purchase of the US and Canadian rights to Galen's oral contraceptive, Loestrin.

It is also seeking details of the Irish company's option to acquire an exclusive licence to Barr's generic version of another Galen oral contraceptive, Ovcon. Both deals were agreed last September. Barr will pay $45 million (€36.3 million) for the Loestrin rights, while Galen will pay $20 million for Ovcon.

Both deals are set to close on February 1st, but neither company was last night able to say what impact the FTC probe would have on this.

As part of the agreement, Galen dropped two lawsuits against Barr. Galen was alleging that the US company had infringed the patents covering its Estrostep contraceptive and female hormone replacement product. The settlement also allows Barr to produce and sell generic versions of both treatments six months before the patents expire.

The FTC has already conducted a preliminary review of the licensing deal. However, the bureau wrote to both parties on the 16th of this month stating that it intended to carry out a further inquiry. At the time the agreement was made, both parties indicated that it could be subject to US anti-trust rules.

"The FTC specifically stated that its letter should not be viewed as an accusation by the commission or its staff of any wrongdoing," last night's statement said. "Barr and Galen believe that the proposed transactions are lawful and proper and intend to co-operate fully with the request."

Last night's news is the latest twist in a saga that has been running since the summer. In July, it emerged that Craigavon, Co Armagh and New Jersey-based Galen was in talks that could pave the way for the company's takeover. While the potential buyer was never named, it was known to be Barr Laboratories.

However, the US company was priced out of any deal when the news prompted a shares surge on the Dublin and London markets. Its founder and former president, Dr Allen McClay, raised almost £5 million sterling (€7 million), when he sold 700,000 shares at a a 19-month high of 710.5 p sterling in London. Dr McClay, who resigned over two years ago, later said he had no knowledge of the talks.

The sudden rise in price triggered a British Financial Services Authority (FSA) inquiry.

Last night's news prompted little reaction from the markets. Galen's Dublin price slipped 1 cent to close at €10.54, while its London quote remained unchanged at 741 sterling.