Flamel Technologies' CEO Discusses Q2 2012 Results - Earnings Call Transcript

Flamel Technologies S.A. (FLML)

Q2 2012 Earnings Conference Call

July 26, 2012 08:30 ET

Executives

Mike Anderson – Chief Executive Officer

Sian Crouzet – Principal Financial Officer

Analysts

Matt Kaplan – Ladenburg Thalmann

David Moskowitz – Private Investor

Peter Butler – Glen Hill Investments

Presentation

Operator

Good morning, ladies and gentlemen and welcome to the Flamel Technologies’ Second Quarter 2012 Results Conference Call. After prepared remarks, we’ll be opening the call to a Q&A period. (Operator Instructions) As a reminder, this call is being recorded.

It is now my pleasure to turn the call over to Mike Anderson, CEO. Please go ahead sir.

Mike Anderson

Thank you, operator, and good morning, ladies and gentlemen. We appreciate very much your joining us today.

Before we begin, I’ll have to open with our usual forward-looking statement language, which is also included in last night’s press release. All statements made on this call about future events, results, performance, products under development, plans or objectives are forward-looking. Actual results may differ materially from these statements due to risks and uncertainties over which we have no control. We encourage our shareholders to review the risk and other disclosures set forth in our SEC filings, which are all publicly available.

It remains a period of transition and transformation for Flamel and I am happy to report that we continue to gain momentum during the past quarter, becoming a more vertically integrated pharmaceutical company, and therefore a company better able to control its own future, remains a key priority for us and we continue to believe it is our best opportunity for delivering sustainable growth and shareholder value. Partnering our world-class drug delivery platforms continues to be a key part of our strategy that our expanded commercialization capabilities are now allowing Flamel to offer even more value to shareholders as our internal projects advance towards commercialization.

For example, last month at the 14th International Symposium on viral hepatitis and liver disease in Shanghai, we shared some of the recent progress we have made on our interferon-alpha extended release program. At the meeting, we have the privilege of giving a lecture and oral presentation on some of the clinical results we have seen so far on Interferon-Alpha XL in hepatitis C patients. Interferon-Alpha XL is a long-acting interferon that utilizes our proprietary Medusa technology to offer a convenient once weekly injection for HCV infections.

And unlike the pegylated interferons on the market today, the interferon molecules in the Flamel product were unmodified and remain fully active potentially resulting in an improved therapeutic profile. We are optimistic that this unique formulation will offer meaningful advantages for patients, especially in regions like China where so many are suffering from chronic infection and may need more tolerable or convenient and affordable treatment options. An 84-patient Phase 2 study of Interferon-Alpha XL recently completed enrollment and we look forward to being able to discuss the progress of programs like this with you down the road.

Now, unfortunately, the competitive nature of our business doesn’t always allow us to reveal everything about specific products that we are developing. Sometimes, partners won’t allow those disclosures as well, but as our portfolio expands and advances, so should the visibility and clearly the value. We are still on track and expect to file at least one NDA this year meaning a newly approved product could be added to our marketed portfolio as early as next year.

During the past quarter, we also announced the addition of Steven Lisi to the management team as Senior Vice President of Business and Corporate Development building and expanding an impactful portfolio will continue to require an aggressive approach to business development. I’m confident that Steve’s extensive experience with strategic transactions and knowledge within a variety of therapeutic areas will accelerate our efforts. Acquisitions like Éclat, partnerships for our Medusa, Micropump, Trigger Lock, and LiquiTime platforms development of internal programs like interferon-alpha XL. These are all part of what we think of when we think of the new fully integrated Flamel Technologies.

At this point I’d like to bring on Sian Crouzet, Flamel’s Principal Financial Officer to discuss the financial results from the quarter. Sian.

Sian Crouzet

Thank you, Mike and good morning. As you are aware the second quarter 2012 is the first period in which we have reflected the integration of Éclat into our statement of operations. As is common in acquisitions of this nature provisional value assumptions have been applied to certain elements of Éclat’s balance sheet during the process of combing our books.

At June 30 the re-measurement of the fair value of the acquisition liabilities generated non-cash entries into the statement of operations, specifically $6.8 million of income which is presented as a separate line item and $1.9 million of additional interest expense. Given the contingent consideration by which the acquisition of Éclat will be paid, we expect to have similar non-cash income and expenses in the future as the fair value of the consideration is updated at each record date. We would look to highlight if non-cash elements going forward in order for you to understand the underlying activity.

Now in terms of revenues they amounted to $6.1 million for the second quarter of 2012 compared to $6.8 million in the second quarter of last year. This decrease was driven by fluctuations in the average exchange rate for the euro against the U.S. dollar between the two periods. Excluding the effect of currency, total revenues in Q2 2012 actually increased marginally year-over-year. As for the components of revenue, license and research revenues were $2.1 million in 2012 versus $2.5 million in the second quarter of 2011. Product sale and services were $2.1 million compared to $3.3 million in the same quarter a year ago. Other revenues in the quarter which were primarily royalty income from GSK on the sales of Coreg CR were $1.9 million versus $2 million in the second quarter of last year.

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