Galen Holdings, the rapidly expanding Belfast pharmaceutical company, is having merger talks with the much larger Ferring Pharmaceuticals, a privately-owned Dutch group.

The deal, if successfully concluded, should catapult Galen into the international league. Dealings in Galen's share have been suspended and will remain so until the end of the year when the merger details are expected to have been agreed.

"Given the significant nature of the proposed transaction, the board of directors of Galen has therefore requested the suspension of the listings of its shares," Galen said in a statement.

Ferring, which originated in Sweden where it has a large manufacturing base, has not released any financial details "because it is a private company" according to a spokesman, adding that it employs 1,700 people internationally. This compares with Galen's 700.

In value terms, Ferring is understood to be around double Galen's size so the merger will, in effect, be a reverse takeover. On this basis, the enlarged Galen, whose shares are quoted on the London and Dublin stock markets, could be valued at more than £1.5 billion, making it a sizeable international pharmaceutical group. Galen is currently valued at £673 million.

Ferring, set up in 1951, is involved in the development, manufacture and marketing of pharmaceutical products and is controlled by the Paulsen family interests. If a deal is agreed, and if it is a straight share swop, then the Paulsen family members would end up as the dominant shareholders in the enlarged group. Their position would be diluted if some of the shares were placed with institutions.

Ferring was set up following the discovery of the peptide hormone ACTH with the founders believing that peptide (a biologically active substance) research could develop into a broad field for pharmaceuticals products. Today, apart from hormone and fertility drugs, the company has developed products such as enzyme inhibitors and oxytocin receptor blockers. It has production units in Sweden, Denmark and Germany, and an international network of sister companies and agencies covering many markets. Ferring also has two research institutes; one in Southampton, UK, and one in San Diego, US.

The proposals for a merger arose because Dr John King, Galen's chief executive, and Mr Frederik Paulsen, chief executive of Ferring, were exploring ways of developing product links and saw a merger as the most attractive route. The merger has not been driven by a need to rationalise as there is very little overlapping, the Ferring spokesman said.

Galen is strong in the UK market and a merger would give Ferring a better presence in that market. It will "create a fairly substantial UK group", the spokesman for Ferring said. Ferring is stronger in research and it has a far wider presence internationally which would benefit Galen. And a get-together would give Ferring a share quotation.

The long share suspension period will arise because Galen wanted to avoid the possibility of a false market in its shares. While discussions have been taking place, more intense talks are needed before a deal can be clinched.

Galen's shares have been among the most successful new issues. Floated on the London Stock Exchange last July, it was over-subscribed six times, with the group's founder, Mr Allen McClay, transferring shares, now worth some £20 million, into a trust for the employees. The London listing was followed by a listing in Dublin two months later with the shares well supported at between 282p and 288p, in a quiet debut. They were last dealt at 415p sterling. Based at Craigavon, Galen has recorded consistent growth. It is looking for further strong growth this year following the 58 per cent growth in pre-tax profit to £11.4 million in the year to end of September, 1997.