Flamel Technologies (NASDAQ: FLML) today announced the acquisition of Éclat Pharmaceuticals, a specialty pharmaceutical company that is focused on the development, approval, and commercialization of niche brands and generic products. Prior to the acquisition, Éclat Pharmaceuticals was an affiliate of Deerfield Capital L.P., which together with its other affiliates is Flamel’s largest shareholder. Éclat has one approved product on the market, Hycet® (hydrocodone acetaminophen oral solution), as well as a suite of products in various stages of development. Éclat’s founder and chief executive officer is Mike Anderson. Mr. Anderson has over forty years of experience in the pharmaceutical industry at companies including AH Robins, Schein Pharmaceutical, and KV Pharmaceutical Co. Steve Willard has resigned as Flamel’s chief executive officer, and Mike Anderson, Éclat’s chief executive officer, has become chief executive officer of Flamel. Mr. Willard will remain a director of Flamel and an employee of a US subsidiary of Flamel. Under the terms of the acquisition, a newly formed US subsidiary of Flamel has issued a $12 million senior note to Éclat Holdings, LLC, the former owner of Éclat, that is guaranteed by Flamel and its subsidiaries and secured by the equity interests and assets of Éclat. The note is payable over six years only if certain contingencies tied to the approval and net sales of certain Éclat products are satisfied. The note accrues interest at an annual rate of 7.5%, payable in kind, until satisfaction of certain of the foregoing contingencies. Flamel also will pay Éclat Holdings an earnout payment of 20% of the gross profit generated by the Éclat launch products. In addition to the note, Flamel has issued two warrants that are subject to shareholder approval. One warrant is exercisable for up to 2,200,000 American Depositary Shares (ADSs), each representing one Ordinary Share, of Flamel at an exercise price of $7.44 per share, and the second warrant is exercisable for up to 1,100,000 ADSs at an exercise price of $11.00 per share. The warrants are exercisable for a six year term, and Flamel also has committed to registering the ADSs underlying the warrants with the SEC if shareholder approval is obtained. If shareholder approval is not obtained, the warrants will be cash settled, and the term will be extended to seven years. The warrants also contain a limitation generally preventing them from being exercised during any time that would result in the holder beneficially owning greater than 19.985% of our ordinary shares.