West Coast Editor

It may be true that "two out of three ain't bad" - but two pieces of good news and one seriously negative item added up to trouble on Wall Street for Flamel Technologies SA.

The Lyon, France-based firm's stock (NASDAQ:FLML) lost more than 22 percent of its value Friday, closing at $14.68, down $4.28.

Gérard Soula, president, CEO and director of research at Flamel, said the market "as usual" focused on the unfavorable event. Bristol-Myers Squibb Co., of New York, has returned rights to Basulin, the recombinant human insulin product that was the subject of a potential $165 million deal last summer. (See BioWorld Today, Aug. 28, 2003.)

"We are still on board for developing the Basulin project," Soula told BioWorld Today. "We're looking actively for a new partner. Clearly it will take some time. It cannot be done overnight." In November, Flamel got the $20 million up-front payment included in the deal.

It isn't the first time Basulin has ended up back in Flamel's hands from a partner. A $42 million deal with Novo Nordisk A/S, of Bagsvaerd, Denmark, began in late 1999 and ended in early 2002. Flamel got $5 million up front in that deal. Before the companies parted ways, Novo had paid out another $10 million. (See BioWorld Today, Jan. 14, 2002.)

"Novo had to reallocate their resources," Soula said. "It was more a strategic issue than anything else."

Basulin uses Flamel's "very new [Medusa] technology based on nanoparticles" to deliver insulin over an extended period, he said. "These types of products take time [to develop]."

Medusa involves a Flamel-designed nanoparticle with the protein on its surface rather than inside (which requires a solvent and denatures the protein). Injected subcutaneously, the protein is slowly released from the surface of the nanoparticle under the skin and then absorbed into the bloodstream.

The other two pieces of news involved Flamel's second polymer-based delivery technology, Micropump, a controlled-release approach for oral small-molecule drugs.

TAP Pharmaceuticals Inc., of Lake Forest, Ill., licensed Micropump worldwide for lansoprazole, the active ingredient in TAP's acid reflux product Prevacid, which sold almost $3.2 billion last year.

TAP will pay all costs of further development, testing, regulatory approval and marketing of the new lansoprazole formulation. Flamel could be in line for more than $100 million in milestones, as well as royalties.

"Investors may not be realizing what it means, but the size of the market worldwide is more than $4 billion," Soula said. "For a newcomer, it takes time to penetrate, and we can have access to the full market in a much easier way. This can be a huge opportunity for Flamel."

Meanwhile, London-based GlaxoSmithKline plc said it has begun Phase III trials with a "major, currently marketed GSK drug" using Micropump, which GSK licensed in March 2003.

"The Glaxo product is less important for market value," Soula said, but the deal proves "not only that the [Micropump] product is performing, but also that the management of Flamel is capable of fully developing a formulation to satisfy a major pharmaceutical company. That is an important milestone in our life."

Trying to push ahead with innovative technologies, Soula said, "you are not driven by the market's feeling or impression. The bottom line is that today the company has $100 million in the bank and has been cash-neutral for almost four years." Flamel raised about $62 million through a stock sale last year. (See BioWorld Today, Oct. 6, 2003.)

"Our business model is very strong, in terms of limiting almost completely the burn rate, but there are some weaknesses," Soula acknowledged. "We need to have a portfolio. We can't be 100 percent successful, but we can't be 100 percent failing, either."

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