Flamel Technologies S.A (
Q3 2011 Earnings Call
November 3, 2011 08:30 am ET
Stephen Willard - CEO, CFO and General Counsel
Siân Crouzet - Principal Financial Officer
Matt Kaplan - Ladenburg Thalmann
Peter Butler - Glen Hill Investment Research
Michael Schechter - Mentor Partners
Previous Statements by FLML
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Good morning, ladies and gentlemen, and welcome to Flamel Technologies announces third quarter 2011 results conference call. After prepared remarks, we will be opening the call to a Q&A period. (Operator Instructions) As a reminder, this call is being recorded. And it is now my pleasure to turn the call over to Mr. Stephen Willard, CEO. Please go ahead Mr. Willard.
Thank you very much and welcome to Flamel Technologies third quarter 2011 financial results conference call. We are pleased with the progress we made during this past quarter with both our existing partnerships and on the new business development fund. A major element of our third quarter profitability was the new supply agreement with GlaxoSmithKline for Coreg CR.
The previous supply agreement as many of you know expired at the end of last year. GSK and Flamel have been engaged in extensive negotiations for the new supply agreement in the period since then. You will recall that last quarter I informed our investors that I expected that we would bring this matter to a successful conclusion before the third quarter call and I am pleased that we were able to fulfill this goal.
I will discuss the new supply agreement following Siân’s presentation of our financial results. We’ve also enjoyed continued progress in the signature of new agreements for our core technologies. Since our last conference call, we have completed two new Medusa feasibility agreements. One, for a controlled release ocular project and a second which is for the delivery of metabolic peptides.
The latter agreement is the second one that we’ve included with the current partner which is one of the top 10 biopharmaceutical companies in the world. We also announced that we’ve entered into a license agreement for the development of a Medusa enabled formulation of tigecycline, an antibiotic that is currently administered via intravenous infusion.
We believe that the Medusa platform [supplicability] to small molecule drugs and it’s ability potentially to take IV administered drugs and formulate these molecules for subcutaneous use are important advantages that may create significant further opportunities for us. We believe that this project could move rapidly to the clinic. I would now ask Siân Crouzet, our principal financial officer to discuss our third quarter results. Siân
Good morning. As Steve just mentioned, our profitable third quarter results were driven by the successful conclusions and negotiation for a new supply agreement with GSK. We reported a profit of $1.7 million for the quarter of $0.07 per share. This is compared to a net loss of $3.3 million or $0.14 per share in third quarter of 2010. We believe that the negotiations with GSK was fruitful and well worth the effort and are pleased to share these results to shareholders.
Total revenues during the third quarter were $10.4 million compared with $8 million in the year-ago quarter. The new supply agreement is effective as of January 1 and it governs pricing for alls materials minus the GSK since the beginning of this year. The additional revenues from the first half of this year that were recognized in the third quarter on confirmation of the agreement amounted to $1.6 million. In addition to the full effects of the new supply agreement, product sales and services benefited from increase demand for Coreg CR microparticles compared to prior year.
The reduction in our license and research revenues year-on-year is a result of two elements. Firstly, the increase of projects in clinical development which requires less involvement from our R&D team during this phase and secondly a number of feasibility agreements that we have conducted at the last 12 to 24 months, are now either being evaluated by our partners increasing pre-clinical trials executed by our partners.
We continue to pursue discussions with partners for the continued development of a certain number this quarter. In terms of costs and expenses, they continue to decline in the third quarter from $11.2 million last year to $9.2 million this year. This decline is in part due to timing year-over-year of our internal clinical and pre-clinical program.
This equally reflects of our commitment to align our cost to our revenue stream. We have thought to limit recruitment, identify opportunities for cost reductions and limit discretionary spend over the past 12 months.
This quarter also demonstrates our capacity to manage our cost structure within our ongoing revenue stream and that benefit from events, such as the conclusion of the year-supply agreement with GSK, generating additional revenue.
We thus finished the quarter with $29.5 million of cash and marketable securities compared to $32.1 million a year ago.
I’ll now turn the call back over to Steve.
Thank you, Siân. We are pleased with our third quarter financial results. We benefitted from the new supply agreement which will further strengthen our balance sheet and our results going forward. The new agreements with GSK allows us to receive significantly greater margins on Coreg CR microparticles shift to GSK then previously as well as establishes guarantee monthly minimum.
This makes our planning process much smoother and give this multi-year term I believe it indicates this Coreg CR will continue to be an important product for Flamel for years to come. The further significance to the agreement is that Flamel will benefit from various substantial revenues for a company of our size separately and distinctly from our Royalty revenues. In fact, we expect with our supply revenues for Coreg CR this year and the potential next year, will be greater than the separate royalty income we received from the products.