Generic threats cast shadow on Galen results

Shares in Craigavon-based pharmaceuticals firm, Galen, lost ground yesterday as concerns about fresh generic threats to the company's products overshadowed robust numbers for the third quarter.

The firm said it was "cognisant" that a copycat version of its new formulation of oral contraceptive, Ovcon, could reach the market before Galen is ready to launch the drug itself.

Galen executive chairman, Dr John King, acknowledged such an outcome could pull back turnover, but said this would not prevent the firm from meeting market expectations for the year.

Company chief executive, Mr Roger Boissoneault, underlined the firm's intention to proceed with the Ovcon line extension, predicting that it should be in place before the end of 2003.

The renewed generic threat put pressure on the company's shares, which closed two cents lower at 606½p in London and shed 10 cents to finish at €8.60 in Dublin.

The negative move came despite bumper third-quarter results, which showed that Galen's sales more than doubled when compared to the same period a year ago.

Revenues were 117 per cent higher at $135.7 million (€119.2 million), with the jump associated largely with a successful string of acquisitions at the firm.

Pre-tax profits dropped to $39.5 million from $100.8 million in the third quarter of 2002, when numbers were inflated by the sale of Galen's pharmaceutical services business. Adjusted earnings per share surpassed analysts' forecasts with a 118 per cent rise to 26.8 cents, while margins also increased.

Dr King said the results reflected "a fantastic quarter" for Galen and stressed the firm's intention to stick with its dual strategy of growth through both acquisition and research and development. He said initial trends for the company's landmark menopausal treatment Femring in the US, where it was recently launched, were positive.

Dr King declined to comment directly on the termination of last month's talks about a possible acquisition of the firm, but said such approaches would continue to be "a fact of life" at firms such as Galen.

Merrion Stockbrokers analyst warned last night, however, that the prospect of takeover, when combined with continuing generic threats, could act as a drag on the firm's valuation over coming months.

Mr Frawley said he would be reducing his expectations for Galen for next year on the back of the latest trading update, describing the stock as "overvalued".