Flamel Technologies Announces Third Quarter 2013 Results

Flamel Technologies Announces Third Quarter 2013 Results 
Second NDA From Eclat Portfolio Accepted for FDA Review 
Preclinical Studies With Medusa hGH XL Completed 
LYON, FRANCE -- (Marketwired) -- 10/31/13 --  Flamel Technologies
(NASDAQ: FLML) today announced its financial results for the third
quarter of 2013. Highlights from the quarter include: 


 
--  Flamel's second NDA has been accepted for review by the US Food and
    Drug Administration (FDA) with a Prescription Drug User Fee Act
    (PDUFA) date of April 28, 2014
--  Flamel continues its work on the launch of Bloxiverz(R), the first
    FDA-approved version of neostigmine sulfate
--  Flamel completed preclinical studies with its proprietary
    extended-release Medusa hGH XL product, a customized version of
    recombinant human growth hormone (rhGH) based upon Flamel's
    proprietary Medusa Technology

  
"We are pleased that the FDA has accepted for review our second NDA
from the Eclat product portfolio and we look forward to the April 28,
2014 PDUFA date," said Mike Anderson, Chief Executive Officer of
Flamel. "For competitive reasons we are not identifying the product
at this time, but this adds to Flamel's pipeline of new products that
we believe will become increasingly more visible to our investors in
2014." 
"For Bloxiverz, the marketing organization is working to place
product into the marketplace and informing clinical staff, hospital
risk managers and Group Purchasing Organizations (GPOs) to make them
aware of availability of the first FDA-approved version of
neostigmine sulfate," added Mr. Anderson. "Since our approval, we
have signed contracts with nearly all of the major GPOs in the US and
sold product to the major drug wholesalers, which distributes the
product to the hospital community. Additionally, we have provided
information to the FDA on our Bloxiverz production levels and the
inventory in the wholesale channel in order to demonstrate that
Flamel can satisfy the entire U.S. demand for neostigmine sulfate."  
"We will continue to push forward on additional NDA filings out of
the Eclat portfolio and on development of additional, innovative
drugs that employ Flamel's proprietary platform of technologies.
Greater research and development spending on these new product
efforts is designed to build Flamel's near-term and mid-term pipeline
and potential revenues. The Company expects to report clinical data
on several products from its internal pipeline in the first half of
2014."  
Medusa hGH XL Update
 As a part of its R&D program, Flamel has
completed preclinical studies with its proprietary extended release
Medusa hGH XL product which utilizes Flamel's Medusa technology
applied to recombinant human growth hormone (rhGH). The Medusa
technology is an innovative and safe depot formulation for the
delivery of a broad range of injectable biological and chemical
drugs. The study was conducted on hypophysectomized ("hypoX") rats,
e.g. animals that have had their pituitary glands removed. This
animal model is relevant for assessing efficacy evaluation in the
condition of growth hormone deficiency. Flamel's study data provided
significant evidence to move this proprietary drug forward into a
human clinical trial in 2014 with once weekly dosing. The table below
summarizes the key data: 


 
-----------------------------------------------------------------
----------
AT DAY 14             Placebo      Low dose IR* High dose IR* Medusa hGH XL
---------------------------------------------------------------------------
Number of animals     10           10           10            10           
---------------------------------------------------------------------------
Body Weight Gain (g)  -2+/-4       16+/-4       36+/-8        22+/-7       
---------------------------------------------------------------------------
Tibia Length (mm)     27.0+/-0.7   27.7+/-0.5   28.7+/-1.1    28.4+/-0.6   
---------------------------------------------------------------------------
 *Immediate Release                                                        

 
The data demonstrates that hypoX rats treated with Medusa hGH XL
showed a comparable increase in body weight gain as compared to the
immediate release drug. The dose of Medusa over 14 days in the study
did not exceed the high dose of the immediate release rhGH over 14
days. There were no adverse events in any arms of the study
attributed to rhGH or Medusa polymer.  
Flamel's Third Quarter Results
 Flamel reported total revenues during
the third quarter of 2013 of $5.6 million, compared with $5.4 million
in the third quarter of 2012, primarily due to an increase in product
sales and services offset partially by a decrease in license and
research revenue.  
Costs of goods and services sold for the third quarter of 2013 were
$1.7 million compared to $1.5 million in the third quarter of 2012.
Research and development costs in the third quarter of 2013 totaled
$6.7 million versus $6.2 million in the prior year period primarily
due to the timing of our development and regulatory activities on our
internal pipeline products. Selling, general and administrative
expenses for the third quarter of 2013 decreased to $2.9 million
compared to $3.1 million in the prior year period.  
Total costs and expenses in the third quarter of 2013 were $12.4
million compared with $11.9 million in the prior year period.
Excluding approximately $1 million related to the remeasurement of
acquisition liabilities in both periods, as discussed below, total
costs and expenses increased by 4.5% to $11.3 million in the third
quarter of 2013 compared to $10.9 million in the third quarter of
2012.  
In the acquisition of Eclat, Flamel acquired several pipeline
products that management believed could be commercially attractive.
As part of the acquisition, Flamel has incurred obligations owed to
the former Eclat shareholders that are contingent on the approval and
market potential for those products. These commitments are revalued
and reassessed at each balance sheet date based on information and
data available at that time resulting in a non-cash expense of $1.0
million in operating expenses in the third quarter of 2013 consistent
with the non-cash expense of $1.1 million in the third quarter of
2012.  
Total interest expense was $0.7 million for the third quarter of
2013, which includes interest on the additional debt financing
completed during the first quarter of 2013, compared to $0.1 million
in interest income in the prior year period.  
Net loss for the third quarter of 2013 was $6.4 million versus a net
loss of $6.4 million in the prior year period. Loss per share (both
basic and diluted) was $0.25 in the third quarter of 2013 versus
$0.26 in the third quarter of 2012. Adjusted net loss for the third
quarter of 2013 was $5.6 million versus an adjusted net loss of $5.5
million in the third quarter of 2012. Adjusted loss per share (both
basic and diluted) was $0.22 in the third quarter of 2013 compared to
an adjusted loss per share of $0.22 in the prior year period. A
reconciliation of adjusted net loss is included below. 
The Company ended the third quarter with cash and marketable
securities of $9.3 million compared to $9.7 million at June 30, 2013,
reflecting a decrease of $0.4 million. However, on July 3, 2013, the
Company received payment of $6.7 million from the French Government
in recognition of the research and development conducted by Flamel in
France, effectively a R&D tax credit. Had the R&D credit been
received in June, then the company would have ended the second
quarter with a cash balance of $16.4 million and the decrease in cash
during the third quarter would have been $7.1 million. The reduction
in cash during the third quarter principally reflects continued
investment in the Company's product pipeline, payment of expenses
related to the launch of Bloxiverz, including the working capital
investment required to build an inventory position, and the slow
uptake of Bloxiverz in the quarter due to the FDA not having removed
unapproved neostigmine products from the market as of this point.
Flamel is working actively to expedite this process. 
After the close of the third quarter, Flamel entered into a term
sheet for a $15 million secured line of credit. Flamel believes it is
prudent to put the line of credit into place now as we continue to
anticipate that Bloxiverz sales will begin to ramp, primarily tied to
the FDA's rulings and other proactive steps taken by the Company. The
final documentation for the line of credit should be completed in
November 2013, although there are be no assurances that documentation
will be completed and the line of credit will be available to the
Company.  
Flamel is disclosing non-GAAP financial measures when providing
financial results, including adjusted net income. Flamel believes
that an evaluation of its ongoing operations (and comparison of
current operations with historical and future operations) would be
difficult if the disclosure of its financial results were limited to
financial measures prepared only in accordance with generally
accepted accounting principles (GAAP) in the U.S. In addition to
disclosing its financial results determined in accordance with GAAP,
Flamel is disclosing certain non-GAAP results that exclude items such
as fair value remeasurements and amortization expense directly
associated with the acquisition and include items such as operating
cash flows associated with the acquisition liabilities and Royalty
Agreement, in order to supplement investors' and other readers'
understanding and assessment of the Company's financial performance.
The Company's management uses these non-GAAP measures internally for
forecasting, budgeting and measuring its operating performance.
Investors and other readers are encouraged to review the related GAAP
financial measures and the reconciliation of non-GAAP measures to
their most closely applicable GAAP measure set forth below and should
consider non-GAAP measures only as a supplement to, not as a
substitute for or as a superior measure to, measures of financial
performance prepared in accordance with GAAP. 
Below is a reconciliation of GAAP net losses attributable to Flamel
and diluted GAAP losses per share to adjusted net losses attributable
to Flamel and adjusted diluted losses per share for the three and
nine months ended September 30, 2013 and 2012 (in thousands except
per share amounts). 


 
                                                                            
                                                                            
                                          Three months ended September 30,  
                                          --------------------------------  
                                                2012             2013       
                                          ---------------  ---------------  
GAAP Net income (loss) and diluted                                          
 earnings (loss) per share                $(6,425) $(0.26) $(6,369) $(0.25) 
                                                                            
Fair value remeasurement of acquisition                                     
 liabilities                                1,060            1,043          
Fair value remeasurement of Royalty                                         
 Agreement                                      -               13          
Tax effects of the above items               (111)             (89)         
                                                                            
Earn-out acquisition payment payable          (73)            (167)         
                                                                            
                                          -------          -------          
Adjusted Net Income (Loss) and adjusted                                     
 diluted earnings (loss) per share        $(5,549) $(0.22) $(5,569) $(0.22) 
                                          =======          =======          
                                                                            
                                                                            
 
                                                                            
                                                                            
                                          Nine months ended September 30,   
                                        ----------------------------------- 
                                              2012               2013       
                                        ----------------  ----------------- 
GAAP Net income (loss) and diluted                                          
 earnings (loss) per share              $(12,330) $(0.49) $(48,052) $ (1.89)
                                                                            
Fair value remeasurement of acquisition                                     
 liabilities                              (3,963)           32,642          
Fair value remeasurement of Royalty                                         
 Agreement                                     -             2,028          
Tax effects of the above items              (236)           (2,342)         
                                                                            
Earn-out acquisition payment payable         (75)             (275)         
                                                                            
                                        --------          --------          
Adjusted Net Income (Loss) and adjusted                                     
 diluted earnings (loss) per share      $(16,604) $(0.66) $(15,999) $ (0.63)
                                        ========          ========          

 
A conference call to discuss these results and other updates is
scheduled for 10:00AM Eastern Time on Thursday, October 31, 2013. A
question and answer period will follow management's prepared remarks.
To participate in the conference call, investors are invited to dial
888-471-3843 (U.S. and Canada) or 719-325-2494 (international). The
conference ID number is 9636511. The conference call webcast may be
accessed at www.flamel.com. A replay of the call will be available
for 14 days, within a few hours after the call ends. Investors may
listen to the replay of the call by dialing 888-203-1112 (U.S. and
Canada) or 719-457-0820 (international), with the passcode 9636511. A
replay of the webcast will also be archived on Flamel's website for
90 days following the call.  
About Flamel Technologies. Flamel Technologies SA's (NASDAQ: FLML)
business model is to blend high-value internally developed products
with its leading drug delivery capabilities. The Company has a
proprietary pipeline of niche specialty pharmaceutical products,
while its drug delivery platforms are focused on the goal of
developing safer, more efficacious formulations of drugs to address
unmet medical needs. Its partnered pipeline includes biological and
chemical drugs formulated with its Medusa(R) and Micropump(R) (and
its applications to the development of liquid formulations, i.e.
LiquiTime(TM) and of abuse-deterrent formulations Trigger Lock(TM))
proprietary drug delivery platforms. Several Medusa-based products
have been successfully tested in clinical trials. The Company has
developed products and manufactures Micropump-based microparticles
under FDA-audited GMP guidelines. Flamel Technologies has
collaborations with a number of leading pharmaceutical and
biotechnology companies, including GlaxoSmithKline (Coreg CR(R),
carvedilol phosphate). The Company is headquartered in Lyon, France
and has operations in St. Louis, Missouri, USA, and manufacturing
facilities in Pessac, France. Additional information may be found at
www.flamel.com.  
This release contains "forward-looking statements" within the meaning
of the Private Securities Litigation Reform Act of 1995, including
certain plans, expectations, goals and projections regarding
financial results, product developments and technology platforms. All
statements that are not clearly historical in nature are
forward-looking, and the words "anticipate," "assume," "believe,"
"expect," "estimate," "plan," "will," "may," and similar expressions
are generally intended to identify forward-looking statements. All
forward-looking statements involve risks, uncertainties and
contingencies, many of which are beyond our control that could cause
actual results to differ materially from those contemplated in such
forward-looking statements. These risks include risks that the
continued integration of Eclat Pharmaceuticals may not be successful
or that certain payment acceleration events may be triggered; the
reacquisition of the exclusive rights to develop and commercialize
IFN-β XL worldwide and identification of an alternative
strategic partner for the program may not be successful; the
identified opportunities will not result in shorter-term, high value
results; clinical trial results may not be positive or our partners
may decide not to move forward; products in the development stage may
not achieve scientific objectives or milestones or meet stringent
regulatory requirements; products in development may not achieve
market acceptance; competitive products and pricing may hinder our
commercial opportunities; we may not be successful in identifying and
pursuing opportunities to develop our own product portfolio using
Flamel's technology; and the risks associated with our reliance on
outside parties and key strategic alliances. These and other risks
are described more fully in Flamel's Annual Report on Form 20-F for
the year ended December 31, 2012 that has been filed with the
Securities and Exchange Commission (SEC). All forward-looking
statements included in this release are based on information
available at the time of the release. We undertake no obligation to
update or alter our forward-looking statements as a result of new
information, future events or otherwise. 


 
              Condensed Consolidated Statements of Operations               
               (Amounts in thousands, except per share data)                
                                                                            
                            Three months ended         Nine months ended    
                               September 30,             September 30,      
                         ------------------------  ------------------------ 
                             2012         2013         2012         2013    
                         -----------  -----------  -----------  ----------- 
Revenue:                                                                    
  License and research                                                      
   revenue               $     1,710  $     1,192  $     5,874  $     4,115 
  Product sales and                                                         
   services                    2,063        2,500        7,494        6,802 
  Other revenues               1,625        1,891        5,423        5,347 
                         -----------  -----------  -----------  ----------- 
    Total revenue              5,398        5,583       18,791       16,264 
                         -----------  -----------  -----------  ----------- 
Costs and expenses:                                                         
  Cost of goods and                                                         
   services sold              (1,500)      (1,736)      (4,365)      (4,014)
  Research and                                                              
   development                (6,246)      (6,680)     (19,953)     (22,513)
  Selling, general and                                                      
   administrative             (3,107)      (2,925)     (11,203)      (8,122)
  Fair value                                                                
   remeasurement of                                                         
   acquisition                                                              
   liabilities (1)            (1,060)      (1,043)       3,963      (32,642)
                                                                            
                         -----------  -----------  -----------  ----------- 
    Total                    (11,913)     (12,384)     (31,558)     (67,291)
                         -----------  -----------  -----------  ----------- 
                                                                            
Profit (loss) from                                                          
 operations                   (6,515)      (6,801)     (12,767)     (51,027)
                                                                            
Interest income                                                             
 (expense), net                  122         (688)         413       (1,757)
Fair value remeasurement                                                    
 of royalty agreement              -          (13)           -       (2,028)
Foreign exchange gain                                                       
 (loss)                          (95)        (161)         (72)        (170)
Other income (loss)               15           66           91          532 
                                                                            
                         -----------  -----------  -----------  ----------- 
Income (loss) before                                                        
 income taxes                 (6,473)      (7,597)     (12,335)     (54,450)
Income tax benefit                                                          
 (expense)                        48        1,228            5        6,398 
                         -----------  -----------  -----------  ----------- 
  Net income (loss)      $    (6,425) $    (6,369) $   (12,330) $   (48,052)
                         ===========  ===========  ===========  =========== 
                                                                            
Earnings (loss) per                                                         
 share                                                                      
                                                                            
  Basic earnings (loss)                                                     
   per ordinary share    $     (0.26) $     (0.25) $     (0.49) $     (1.89)
  Diluted earnings                                                          
   (loss) per share      $     (0.26) $     (0.25) $     (0.49) $     (1.89)
                                                                            
Weighted average number                                                     
 of shares outstanding                                                      
 (in thousands) :                                                           
                                                                            
  Basic                       25,157       25,465       25,109       25,434 
  Diluted                     25,157       25,465       25,109       25,434 
                                                                            
(1) Includes impact of passage of time on valuation of acquisition          
 liabilities, which was classified in interest expense in prior period.     

  
Contact: 
Michael S. Anderson
Phone: 33 (0) 4 72 78 34 34
Fax: 33 (0) 4 72 78 34 35
E-mail: anderson@flamel.com  
Investor Relations
Bob Yedid 
ICR Inc. 
Phone: 646-277-1250
Email: bob.yedid@icrinc.com 
 
 
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