BioWorld International Correspondent

PARIS - Flamel Technologies reported a net loss of $27.4 million for 2005, against a net profit of $12.5 million in 2004.

That $40 million turnaround in the company’s fortunes was due to a sharp drop in operating revenue, from $55.4 million in 2004 to $23.6 million last year. Income from license agreements and research collaborations plunged to $20.8 million last year from $50.9 million in 2004, while revenues from products sales and services also were more than halved, from $3.8 million to $1.8 million from one year to the next.

At the same time, the Lyon-based company’s costs increased by 38 percent to $64.4 million last year, up from $46.6 million in 2004 due to investments in facilities for formulating additional drugs using Flamel’s delivery technologies. Flamel nevertheless was able to report that its cash and liquid assets totaled $83.7 million at the end of 2005, as against $105.4 million a year earlier, asserting that this was "in line with expectations." It also stressed that its reserves would have declined by no more than $8 million last year, had there been no change in the exchange rate between the euro and the dollar.

The new drug formulations include interferon-alpha and interleukin-2, as well as a new formulation of Basulin, the company’s long-acting human insulin product. Flamel is building a new manufacturing facility at Pessac, in Southwestern France, which is due to be operating shortly, said the company’s chief financial officer, Michel Finance.

Most of Flamel’s license and research income in 2005 came from two partners, GlaxoSmithKline plc, of London, and TAP Pharmaceutical Products Inc. (although the latter now is an ex-partner). Last December GlaxoSmithKline submitted a new drug application to the FDA for a formulation of Coreg incorporating Flamel’s Micropump delivery technology, which triggered the payment of a $2 million milestone to Flamel under the license agreement signed between the companies in March 2003.

Micropump is a controlled-release, taste-masking system for the oral administration of small-molecule drugs. It is one of two polymer-based drug delivery systems developed by Flamel, the other being Medusa, a nano-particulate system designed to deliver therapeutic proteins and peptides.

Flamel’s collaboration with GSK is its most valuable asset, since other partnerships have failed to bear fruit. The most recent failure was its collaboration with TAP Pharmaceutical Products, a joint venture between Abbott Laboratories, of Abbott Park, Ill., and Takeda Pharmaceutical Co. Ltd., of Osaka, Japan. TAP announced last September that it had decided to terminate the license agreement it concluded with Flamel in September 2004 for using Micropump to deliver Prevacid (lansoprazole). The deal theoretically gave Flamel Technologies the possibility of earning more than $100 million in milestones, as well as royalties on sales of the product. After carrying out several trials of the Micropump formulation of lansoprazole, however, TAP decided to switch to an enantiomer of lansoprazole for a Phase III trial.

The previous March, Flamel terminated its license agreement with Toronto-based Biovail Corp. covering Flamel’s long-acting acyclovir formulation, Genvir. The agreement was signed in February 2003 and granted Biovail a license for the U.S. and Canada that was conditional on its initiating certain clinical trials in the U.S. for the treatment of episodic and recurrent genital herpes infections.

Before that, Flamel Technologies had two setbacks in its plans for getting Basulin onto the market. It originally signed a $42-million collaboration agreement for the development of Basulin with Novo Nordisk A/S, of Bagsvaerd, Denmark, in late 1999, but terminated the partnership in January 2002 because it was dissatisfied with the progress made by Novo.

Then, in August 2003, Flamel signed a licensing and commercialization agreement for Basulin with New York-based Bristol-Myers Squibb Co. The deal was potentially worth $165 million to the French company, which received an up-front payment of $20 million the following November. But in September 2004, BMS informed Flamel that it had decided to terminate the agreement for commercial and other reasons.

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