The pharmaceutical firm began life 36 years ago in Craigavon and its headquarters are still there, writes Una McCaffrey.

Putting the probable £1.6 billion (€2.3 billion) private equity buyout of Warner Chilcott (formerly Galen) into context requires a trip to Craigavon in Co Armagh. It is here, in a town hardly known for its industrial or financial prowess, that the 36-year-old multibillion euro company finds its roots, and here that it retains its headquarters.

Craigavon, unlikely as it may seem to some, is the place where Warner Chilcott's founder, Dr Allen McClay saw his vision of the pharmaceutical future.

In 1968, Dr McClay left his job in Glaxo and put in motion a corporate whirlwind that would make him, and a small group of colleagues, into millionaires - many times over.

His initial plan was for a business marketing pharmaceutical products, which subsequently grew to include a manufacturing operation.

Over the next decade, Galen - named after a famous Roman physician - lured and retained many of the North's top chemistry and pharmacy minds, with the hire of Dr John King in 1979 typifying the trend.

Dr King, who is set to raise more than £120 million from selling his holding in the company under the current takeover proposal, had previously worked as a lecturer in Queen's University.

He quickly rose through Galen's ranks and, by the time the firm floated in 1997, he was chief executive.

At the time of the flotation, Dr King had a 22.2 per cent stake in the firm that was worth £40.4 million, while finance director Mr Geoffrey Elliott had a 7.2 per cent holding worth £13.1 million.

Mr Elliot stands to take out £47 million under this week's deal, with both men having raised many more millions through share sales over the past 15 years or so.

Dr McClay's holding in 1997 was 34.7 per cent, which was worth a cool £63 million. He did not absorb the entire benefit for himself however, opting instead to donate £9 million to Queen's University and setting aside a further £7.5 million in a trust for Galen's staff.

The concept for the company in 1997 was to build on its manufacturing capability with the help of a £30 million flotation injection. Galen's main business at the time concentrated on clinical trial supplies, or the packaging and distribution of new drugs used in patient trials.

It had its toe in the water elsewhere, however, most significantly through a patent for a HRT delivery system - an intravaginal ring - then under development.

Galen had made a profit of £11.4 million in the year to the end of September 1997 on sales of £39.3 million. All was progressing well, including the firm's share price, which launched at 150p sterling and had climbed over 400p within a year.

In mid-1998, rumours arose of merger talks with a privately owned, much larger Dutch firm. The £1.5 billion deal, with Ferring, would have elevated Galen into the heavyweight international league. The plan was soon abandoned, however, amid a wider stock market slump which would have caused problems for the equity issue the deal would have required.

By 1999, the firm had started on its international expansion plans through the purchase of a small US clinical trials services firm. Another small acquisition soon followed in the UK, with Galen all the while adding to its manufacturing capabilities in the North.

Bigger news came in 2000 when Galen moved to take over the Dublin-based but US-focused Warner Chilcott group for £260 million. The all-share deal created a specialist women's healthcare group and, crucially, gave Galen future access to the US market for its own HRT system without losing revenue through licensing deals.

UK approval for the intravaginal ring, which offers an alternative to pills and patches, came in late 2000.

The US market was becoming the group's real focus, however, as the Warner Chilcott deal lifted revenues by 113 per cent to £183 million in 2001.

The story was well-received by investors, with a £300 million 2001 share issue more than over-subscribed. At that stage, the firm raised more than 60 per cent of its sales in dollars and was slowly raising its exposure to the hormone replacement therapy business through product acquisitions.

At around the same time, Dr McClay was preparing to retire, thus ushering in the leadership of Dr King and a new era for Galen. Women's healthcare and dermatology were now the firm's primary concentrations, with the businesses that had provided its roots progressively being sidelined.

The first practical evidence of this came in early 2002, when Dr McClay paid £25 million for Galen's chemical development services operation.

Talks on the divestment of the company's clinical trials business began soon afterwards, while Galen increased its dermatology portfolio with the purchase of two products from Bristol Myers Squibb for more than €46 million.

US expansion then began in earnest, with Dr King observing in May 2002 that the company was prepared to spend as much as $400 million on more acquisitions.

By the end of 2002, Dr McClay had spent a further £140 million on buying back parts of the business he had founded, funding the purchases through the sale of Galen shares. It was a strategy he would maintain into this year, when he completed the purchase of the last Galen (now renamed Warner Chilcott) asset on offer for £40 million. Things had come full circle, with Warner Chilcott having grown from one small home-grown Craigavon operation to two multinational pharmaceutical firms within the lifetime of its founder.

Since 2002, Galen embarked on yet more expansion, all the while coping with the ups and downs created by fears about HRT. Particular reassurance came in October 2002, however, when the US regulator approved the firm's intravaginal ring for sale.

Galen's confidence in the US market was further affirmed two months later through the purchase of pre-menstrual treatment, Sarafem, for €292.5 million.

The move was not immediately positive, however, with a generic threat (where another company copies the drug and sells it more cheaply) instantly emerging. A legal battle commenced and continued until earlier this year, when it swung into Galen's favour. Generic competition also began to threaten some of the company's top-selling contraceptives but Galen pushed ahead regardless, into 2003, with the purchase of three more women's healthcare treatments from Pfizer for $359 million.

The final cherry came in May this year when Galen said it was buying a 270,000 sq ft manufacturing facility in Puerto Rico to help save on production costs. Galen currently records annual sales of about $500 million (almost all of total revenues) in the US, with some individual drugs turning over $100 million. It's all a long way from Craigavon in 1968.

Unsurprisingly, the prospect of a takeover of the high-growth company has been in the background for some time. Talks with Barr Laboratories faltered in 2003, with the prospect of a buyout dying until it re-emerged with a vengeance only known to private equity groups in September.