Galen shares bounce back

Just a couple of weeks ago when Galen was forced to scrap its merger with the Dutch group Ferring, Galen shares collapsed 25 per cent as the market took a dim view of the end of the merger talks.

The market seemed to ignore the fact that while the end of the merger talks was a blow to Galen's development plans, the company was in exactly the same shape as it was before the shares were suspended.

All that had changed was that the market had gone through its August-September slump, and quite simply the shares were severely oversold when they were marked down from the pre-suspension 437p sterling to 337p sterling.

That's why it is no great surprise that Galen has bounced back to trade comfortably north of 400p ahead of full-year results next week. It might be some time before Galen regains its 527p sterling of earlier this year, but if the results are in any serious way ahead of £13.8 million profits and 8p per share earnings forecasts, then further growth is likely.

In the longer term, however, with the Ferring deal now gone, Allan McClay and John King will have to look at some mechanism to free up the share register, especially if Galen does rejoin the FTSE Mid-250 later this year.

The index funds which use the Mid-250 as their base will want Galen shares. However they will find it difficult to get them if 75 per cent of the shares are still held by directors and staff.

A free float of little more than the minimum 25 per cent is really not sufficient these days and don't be surprised if a good set of results and a rise in the share price sees Dr McClay reduce his current 35 per cent stake in the company.