Shares in Northern Irish drugmaker Galen reversed their recent gains yesterday after the firm said takeover talks had been terminated.
Galen shares lost 15.6 per cent to 595p in London, its main market. In Dublin, they closed 16 per cent lower at €8.45, giving up all the gains made last week on foot of the prospect of a sale.
But it has emerged that Galen's founder and former president, Dr Allen McClay, managed to take advantage of the recent run-up in the share price to raise nearly £5 million (€7.06 million) by selling stock last Friday. Dr McClay sold 700,000 shares as the stock hit a 19-month high of 710½p, raising £4.97 million, leaving him with an 8.85 per cent stake in the firm.
Friday's rise in Galen's stock price is understood to have triggered an inquiry by the Financial Services Authority, the British watchdog.
Dr McClay denied insider knowledge of the talks. "I had absolutely none. I resigned on September 30th, 2001. I knew nothing about it [the acquisition talks\] until Thursday," he said. "The only thing I regret is that I hadn't sold more."
Following the sudden advance in its share price last week, Galen was forced to disclose on Thursday that it was in preliminary discussions that could lead to an offer being made for the company. It did not identify the potential bidder but it was believed to be New Jersey-based Barr Laboratories.
However, disclosure that the talks were going on may have helped to scupper a deal, industry sources said yesterday. They noted that while Galen's share price rallied on the news of a deal, Barr's stock fell by 15 per cent in the US last Thursday and Friday.
This would have made it very difficult for Barr to proceed with a deal, particularly given the likelihood that any transaction would have had to involve a paper element if Barr were to afford the £1.4-£1.5 billion valuation being put on Galen.
"It was a double whammy from Barr's point of view," said Davy analyst Mr Jack Gorman.
However, analysts did not rule out the possibility that another company might decide to take a look at Galen, which specialises in women's healthcare and skincare products, now that it is deemed to be in play.
Other companies with an interest in women's health that might consider a bid for Galen include Dutch firm Akzo Nobel, German group Schering, and US players such as Wyeth and Johnson & Johnson.
Galen has been active on the acquisition front in recent months, adding to its stable of women's healthcare products.
