Flamel's finances flounder after string of setbacks

Only $2.3 million of license and research revenues were generated, compared to $12.3 million in the third quarter of 2004, buoyed by milestones and R&D revenues from Bristol-Myers Squibb (BMS) and TAP Pharmaceuticals.

However the French drug-delivery company still has a strong cash position, with cash and marketable securities totaling $89.4 million.

"Flamel Technologies remains very strong financially and in a good position for growing revenues while tightening expenses as shown in the third quarter,"​ said Michel Finance, Flamel's​ chief financial officer.

For now, license and research revenue is driving Flamel's business. Product sales and services for the third quarter were down from $0.5 million to $0.9 million this time last year.

The primary problem with Flamel, which has been built around two polymer-based drug delivery technologies - the Medusa and the Micropump - is that the launch of these technologies onto the marketplace has been marked by a number of false starts.

The company have experienced two separate failed Medusa projects for Bauslin (long-acting insulin). Medusa takes the form of a nanoparticle designed to deliver therapeutic proteins, with the primary advantage of requiring no solvents or other chemical processes that can reduce the proteins activity.

The product was picked up initially by Novo Nordisk, but the latter exited the agreement in 2002.

BMS took up the Basulin reins last year with a $165 million licensing agreement, but dismounted from the project after a wide-ranging review of its R&D pipeline led to a number of projects being sidelined.

Meanwhile, there have been other disappointments for the Micropump technology, which is a controlled-release system designed for orally-administered small molecule drugs.

The most recent blow was delivered in September, when TAP Pharmaceutical Products pulled out of deal to develop a formulation of its big-selling gastrointestinal drug lansoprazole based on Flamel's Micropump technology.

TAP, a joint venture between US drugmaker Abbott Laboratories and Japan's Takeda, had been working with Flamel on an improved formulation of lansoprazole, the active ingredient in TAP's Prevacid.

In March, Biovail pulled out of an agreement to develop a Micropump formulation of the antiviral drug acyclovir called Genvir, after failing to meet its own schedule for starting pivotal trials of the herpes treatment.

In late 2003 GlaxoSmithKline (GSK) exited a pact to develop a Micropump version of its blockbuster antibiotic Augmentin (amoxicillin/cluvulanate) 'for commercial reasons'.

Flamel chief executive Stephen Willard, who took over the firm after its founder and former CEO Gerard Soula was ousted by rebel shareholders in June, insisted that TAP's decision did not reflect badly on the Micropump technology.

"Our formulation is a strong one. It met the goals for the formulation sufficient for payment of the success milestone in the first quarter of this year. It performed well against currently available products in a number of clinical trials,"​ he said.

Willard said Flamel would now determine the best way to achieve further value for the technology with respect to this class of compounds.

However last week Flamel did have some good news to report regarding the Micropump formulation of GSK's beta-blocker Coreg (carvedilol).

GSK just reported positive phase III clinical trails for a Micropump-delivered version of Coreg - used for the treatment of hypertension and congestive heart failure.

GSK expects to file a new drug application by the end of the year for the drug and expects to market it by 2007.

Flamel has hinted at first-year royalties of around $20 million, pending its approval for market by the US Food and Drug Administration (FDA).

This development provides Flamel with the first real hope of an FDA-approved implementation of its Micropump technology.

Also in Flamel's pipeline is an undisclosed Micropump drug for Merck and a number of internally developed products.

"There is broad interest in the pharmaceutical industry for our products and technologies and we are working actively to seek additional licenses and partnerships,"​ said Flamel.