Flamel Technologies SA ( FLML)

Q3 2010 Earnings Call Transcript

November 5, 2010 8:30 am ET

Executives

Stephen Willard – CEO

Sian Crouzet – Principal Financial Officer

Analysts

Matt Kaplan – Ladenburg Thalmann

David Moskowitz – Madison Williams

Presentation

Operator

Good morning, ladies and gentlemen, and welcome to the Flamel Technologies third quarter 2010 earnings conference call. Please note that this call is being recorded. There will be a question and answer session, following today's presentation. (Operator Instructions)

I would now like to turn the call over to Mr. Stephen Willard, CEO. Please go ahead, sir.

Stephen Willard

Yes. Thank you. Good morning, everyone and thank you for joining our call today. As always, we open with the forward-looking statement language, which is set out at the conclusion of yesterday's press release. All statements made on this call are subject to a variety of future events and risk factors, including those set forth in our filings with the SEC, particularly our Form 20-F, which are all publicly available. Please review them, as they are directly applicable to every element of this call.

Since our last quarterly call in August, we have been progressing well on our major projects. Last month, we announced the achievement of the 3 million euro clinical development milestone and our development of an extended release formula for Merck Serono. The molecule we've been working on with Merck Serono is beta interferon 1a. Yesterday, we announced the achievement of a second additional milestone for the same program. According to the terms that we initially negotiated in 2007, we will receive a further $1 million milestone payment.

We also announced last month that we have received a letter from the FDA in response to our Citizen's Petition that we submitted regarding Coreg CR. Our petition detailed our concerns that any generic formulation submitted for approval to the FDA be concerted according to the criteria applied to the submission of Coreg CR. We particularly focused on the demonstrated safety and efficacy of Coreg CR in the treatment of congestive heart failure patients. A copy of the FDA's letter is available on our website.

We are very pleased with the portions of our Citizen's Petition which were granted and we believe that the FDA has taken a very serious and thoughtful approach to the issues we raised for the protection of patients taking potential generic copies of Coreg CR.

As we have previously discussed, URL Pharmaceuticals filed an ANDA application for Coreg CR approximately two and a half years ago. To our knowledge, they are the only company that has filed an ANDA application for an extended release carvedilol phosphate formulation and they are the only company to have responded to the Citizen's Petition that we submitted to the FDA. To date, no approval from the FDA for any extended release carvedilol phosphate formulation has occurred.

I would like to ask Sian Crouzet, our Principal Financial Officer, to review our third quarter financial results and then I will discuss the Merck Serono program and other ongoing work before we open the call for questions. Sian?

Sian Crouzet

Thank you, Steve. There are a couple of elements I would like to highlight in our third quarter results. Firstly, they do not include the two milestones we have recently achieved on the development program with Merck Serono.

The first milestone of 3 million euros that was announced last month was paid this week. The second milestone of 1 million euros referred to in our press release last night is expected to be paid in the next month. Both of these events will impact our fourth-quarter earnings and cash position.

Now, in relation to our third quarter results, we have witnessed a drop in revenues, year on year. As discussed last quarter, we have advanced a number of projects and as a consequence work on these projects is correspondingly reduced while clinical trials are ongoing. That said, we are maintaining a steady pipeline of feasibility projects with different partners.

Product sales and services relating to the production of Coreg CR micro particles were $1.8 million compared with $2.6 million in the third quarter of 2009. And other revenues, primarily royalties on the sales of Coreg CR were $2.1 million compared with $2.5 million in the year ago period.

Our costs and expenses have declined during the third quarter from $13.2 million in 2009 to $11.2 million. The decline is across all three categories, as we maintain our commitment to strict cost control in light of reduced revenues. Production costs declined from $2.6 million to $1.5 million in the current period. R&D declined from $7.5 million to $6.7 million and SG&A from $3.1 million to $2.9 million.

Net loss for the quarter was comparable with the third quarter of 2009, at $3.3 million and a net loss per share of $0.14. We finished the third quarter with cash and marketable securities of $32.1 million. And as mentioned at the outset, the two recently announced milestones from Merck Serono will impact our fourth quarter financial results.

I will now turn the call back over to Steve.

Stephen Willard

Thank you very much, Sian. Obviously, we are especially pleased with the progress that we continue to make in our work with Merck Serono on an extended release formulation of beta interferon.

Last night, we announced that we have achieved a second milestone during the fourth quarter. According to the terms agreed, we will receive 1 million for that milestone. And that's two milestones achieved with Merck Serono in the space of just one month.

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