The Investment Column: Galen

WERE IT not for hormone replacement therapy (HRT), Galen, the Armagh-based pharmaceuticals company, would still be expected to deliver 30 per cent earnings per share growth. But Galen's decision to double investment in developing its intravaginal ring (IVR), a pioneering way of delivering HRT, means earnings growth will be rather less energetic in the coming year.

Still, existing products should drive the sales line upwards. Ethical Pharmaceutical Services, which provides drug-trial services to larger pharma companies and accounts for 42 per cent of turnover, grew sales by 72 per cent to pounds 28m last year.

The slower-growing Ethical Pharmaceutical Products, which makes prescription medicines ranging from analgesics to respiratory products, grew sales by 19 per cent.

In recent years, the company has boosted its US presence. However, the moves overseas haven't gone entirely smoothly, and the group took a pounds 2.7m hit after its merger with Holland's Ferring Pharmaceuticals fell though.

While the services business should grow at around 40 per cent annually, it is the expectation of up to pounds 50m sales for the IVR, due for launch late next year, which keep the shares on a premium rating. The shares closed up 60p at 667.5p yesterday as the market warmed to Galen's prospects, though some of the sharp share rise can be attributed to the dismal 33 per cent free float. Management appear keen to rectify this, either by selling down their own hefty holdings, or issuing more shares to fund further acquisitions.

On analysts' expectations of 14.9p earnings per share this year, rising to 18.5p in 2001 when IVR sales begin, the shares trade on a forward multiple of 45. The shares are fully valued.