PARIS ¿ Flamel Technologies S.A. has agreed to a private placement of securities worth $12.8 million with three venture capital funds ¿ Biotechnology Value Fund and Alta BioPharma Partners, both of San Francisco, and New York-based Chase Capital Partners.

Alta BioPharma is already a shareholder in the company, while the other two are new investors. The financing, which is expected to close at the end of March, will boost Flamel¿s reserves of cash and cash equivalents to $16 million.

The agreement provides for Flamel, of Lyon, to sell units at the French Franc equivalent of $4, with each unit consisting of one ordinary share, 0.56 of a Class A warrant and 0.60 of a combination of Class B or C warrants. Altogether, 3,212,500 additional ordinary shares are to be issued, together with warrants for a total of 3,726,599 ordinary shares. The warrants have a five-year term. On completion of this operation, the company will have a total of 16.15 million shares outstanding, excluding the exercise of warrants.

Flamel has been listed on Nasdaq since June 1996, when an initial public offering netted it $30 million. The company raised a further $10 million in May 1998 through the sale of 2 million shares (14 percent of its equity) to the French holding company Financihre et Industrielle Gaz et Eaux (G&E), which is affiliated with the Lazard group.

In addition, Flamel recently received an up-front payment of $5 million from Novo Nordisk A/S, of Copenhagen, Denmark, with which it concluded a development and licensing agreement in December covering its diabetic treatment Basulin, a controlled-release formulation of insulin for treating Type I and II diabetes. The agreement could be worth a further $37 million to Flamel in milestone payments and royalties. (See BioWorld International, Dec. 15, 1999, p. 1.)

Flamel CEO Girard Soula told BioWorld International at the time that the clinical development of Basulin, its lead product, would take a further four or five years and that he expected it to be on the market in 2004.

Specialized in the development of proprietary controlled-release drug delivery systems that incorporate advanced polymer technologies and are specifically designed to deliver peptides, proteins or oral drugs, Flamel intends to use the proceeds of this placement to fund research and development activities, including clinical trials, as well as for general and administrative expenses, capital investment and working capital. According to Soula, ¿the additional capital will permit us to continue our research and development program through the next two years . . . and to accelerate some of our other programs, such as the development of a long-acting protein.¿

Flamel just announced its financial results for 1999, which reveal the impact of the agreement with Novo Nordisk. Its revenues in the fourth quarter jumped to $7 million from $2.9 million in the corresponding three months of 1998, with license and research income amounting to $5.6 million. The result was a net profit of $2.2 million for the quarter, while for the year as a whole the company¿s net loss was reduced to $6.7 million from $7.8 million in 1998. Revenues rose to $11 million from $9.5 million in 1998, with R&D funding in particular going up to $7.3 million from $4.3 million while R&D spending was virtually unchanged at $11 million. The company ended 1999 with cash reserves of $5.2 million.

A particular achievement for Flamel in 1999, according to Chief Financial Officer Patrick Perrin, was the receipt of its first royalty income arising from the launch by Corning Inc. of a new photochromic eyeglass lens incorporating polymer technology developed by Flamel.

The details of the private share placement are as follows. The Class A and Class B warrants will be exercisable at the French franc equivalent of $6 per share and the Class C warrants at $0.12 per share. The Class B and Class C warrants are structured in three tranches enabling investors to purchase a combination of them that depends on the trading price for Flamel¿s ADSs on Nasdaq during the remainder of this year. If the closing price falls below $6 for more than eight trading days, then the proportion of Class C warrants exercisable will increase and that of Class B warrants will decrease correspondingly. The relative percentage of each (33, 66 or 100 percent) that will be exercisable will be determined at specified benchmark prices below $6. If the price of ADSs do not fall below $6 for more than eight days this year, then all Class B warrants will be exercisable and none of the Class C warrants. Conversely, if the ADSs drop below $3 for more than eight days, all Class C warrants will be exercisable and no Class B warrants.

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