PARIS - Flamel Technologies SA raised US$10 million through the sale of 2 million ordinary shares to Financière et Industrielle Gaz et Eaux (G&E), a French holding company with assets of $2.4 billion that is affiliated with the Lazard group.

The funds will be used to finance ongoing research and development programs, capital investments and other corporate needs at Flamel, of Vennisseux, France.

The deal, which will give G&E a 14 percent stake in Flamel, is to be submitted for the approval of Flamel's existing shareholders at an extraordinary general assembly scheduled for June 12. But the company said a core group of shareholders controlling more than 50 percent of its equity already is committed to voting in favor of it.

Following an initial public offering on Nasdaq in June 1996, in which Flamel raised $30 million through the sale of 34 percent of its equity to the public, that core group of investors now holds 52 percent of the company's capital. The main institutions in the group are Warburg Pincus & Co., which holds 19 percent, and Bedco, which has 12 percent, as well as Hémera, a Luxembourg-registered finance company with 7 percent. In addition, Flamel's management and staff have a 12 percent stake between them.

Patrick Perrin, the company's chief financial officer, said G&E's share purchase will reduce the holdings of Warburg Pincus, Bedco and Hémera to about 15 percent, 9 percent and 5 percent, respectively.

The deal also gives G&E the right to participate in future capital increases within the next two years at a maximum price of $10 per share. Specifically, G&E has the right to acquire five-year warrants convertible to 16.6 percent of new share capital. The warrants can be converted into shares in the event a future capital increase (barring some exceptions) occurs within the two years following the date G&E's investment closes, and then for the three-year period following the capital increase.

Perrin told BioWorld International this injection of funds would last more than two years, but he did not rule out a share issue on France's Nouveau Marché sooner or later.

“The company remains in a phase of heavy spending,“ he said, which is due in large part to the clinical trials it is conducting. For 1997 Flamel reported a virtually unchanged net loss of $6.8 million. Revenues were up 64 percent, at $8.1 million, while research and development spending increased by 27 percent to $10.1 million. At the year end it had cash and liquid investments of $10.5 million, down from $23.2 million the year before.

Flamel specializes in the development of oral drug delivery systems using advanced polymer technologies for the delivery of controlled-release drugs and biomaterials. Its main technology platforms are its proprietary Micropump and Medusa systems for the delivery of medicinal active ingredients and its Agsome system for the delivery of agrochemical compounds.

UK Approves Controlled-Release Aspirin

In February Flamel's Asacard cardiovascular aspirin received marketing approval in the U.K. for prophylaxis against myocardial infarction, stroke and vascular death. Asacard is a controlled-release formulation of aspirin designed specifically for the treatment of cardiovascular diseases. It is delivered by Flamel's Micropump system, and in clinical trials completed last fall was found to cause less endoscopic damage than conventional aspirin.

Asacard should be available in the U.K. before the end of 1998, and Flamel now is using the European Union's mutual recognition procedure to extend the U.K. marketing approval to other European countries.

St. Louis-based Monsanto Co. subsidiary Searle & Co., of Skokie, Ill., has the license to market Asacard in most European countries, under an agreement providing for it to manufacture the final product using controlled-release microparticles containing aspirin supplied by Flamel. Flamel will receive royalties from Searle's sales of the product as well as milestone payments when approval is obtained in the main European countries.

A patent for Asacard was issued in the U.S. in 1997 and Phase I trials currently are under way there. *

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