Flamel Technologies S.A. ( FLML) Q4 2011 Earnings Conference Call March 15, 2012 8:30 AM ET Executives Stephen Willard – Director Mike Anderson – CEO Siân Crouzet – Principal Financial Officer Analysts Matt Kaplan – Ladenburg Thalman Fred Milligan – Sanders Morris Harris Peter Butler – Glen Hill Investments Roger Bensen – Number One Corporation Tom Weissenborn – Credit Suisse Presentation Operator
Under the terms of the acquisition, a newly formed U.S. subsidiary of Flamel has issued a $12 million senior note to Eclat Holdings LLC, the former owner of Eclat that is guaranteed by Flamel and its subsidiaries and secured by equity interest and assets of Eclat.The note is payable over six years only if certain contingencies tied to the approval and net sales of certain Eclat 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 will also pay Eclat Holdings and earn out payment of 20% of the gross profit generated by the Eclat product launches. In addition to the note, Flamel has issued two warrants that are subject to shareholder approval. One warrant is exercisable for up to 2.2 million American depositary share ADS, 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 1.1 million ADS at an exercise price of $11 per share. The warrants are exercisable for a six-year term and Flamel has committed to register 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 19.98% of our ordinary shares. In addition to the products, Eclat comes with a strong management team of pharmaceutical veterans. The board has elected Mike Anderson, Eclat CEO to head the combined company as we advance on our strategy to create a more vertically integrated pharmaceutical company with greater upside potential and control of our pipeline and news flow. We believe that the combination of Mike’s experience and our drug development expertise will create dramatic opportunities for the growth of Flamel Technologies.
I would like to note that the acquisition brings $2 million in incremental cash resources to the company. I am very pleased to be able to introduce to all of my fellow shareholders, to Mike Anderson, Flamel’s new CEO. Mike is here in France and I would ask him, please, to discuss the company that he founded and his plan for Flamel. Siân Crouzet will then discuss our financial results for 2011 and the fourth quarter. And then with Mike’s permission, I will review our 2011 highlights and operating results.Mike Anderson Thank you, Steve. We’re very pleased for our new association with Flamel Technologies, which as you know is the leader in drug delivery technology. A combination of Flamel and Eclat will provide shareholders with significantly more flexibility than in the past by combining the cutting-edge technology of Flamel with the commercial capabilities of Eclat, which as you may know is a St. Louis-based specialty pharma company. Since the acquisition was built around a contingent payment structure tied to FDA approval and net sales of Eclat launch products, the deal was backend-loaded and limits downside to Flamel shareholders. At the same time, I believe that the Eclat product portfolio provides our company with multiple high value opportunities for near-term cash flows that carry a balance risk profile. The strategy we have pursued at Eclat is straightforward. We focus on niche opportunities where we can bring new products to market at relatively low cost. We plan to employ in the near-term cash flows that we anticipate generating, the funding of development of products using Flamel’s Best in Class drug delivery platforms as we believe that the opportunities for the combined company are numerous and significant. Eclat has been in existence since November of 2010 and it was created to pursue the development, approval, and marketing of NDAs primarily 505(b)(2)s. The company is focused on niche products and on products that can be commercialized without a large marketing infrastructure. Read the rest of this transcript for free on seekingalpha.com