Flamel Technologies SA Q2 2010 Earnings Call Transcript

Jul.29.10 | About: Flamel Technologies (FLML)

Flamel Technologies SA, (NASDAQ:FLML)

2Q 2010 Earnings Call

July 29, 2010 08:30 am ET

Executives

Stephen Willard

Sian Crouzet

Analyst

Matt Kaplan – Ladenburg

Peter Butler – Glen Hill Investments

Edward Nash – Roth Capital Partners

David Moskowitz – Madison Williams

Presentation

Operator

Please stand by, good morning ladies and gentlemen and welcome to the Flamel Technologies Second Quarter Earnings Conference Call. Please note that this call is being recorded.

Flamel Technologies requests that all investors review the forward looking statement language which is set out at the conclusion of yesterday’s press release.

All statements made on this call are subject to a variety of future events and risk factors including those set forth in Flamel’s filings with the SEC particularly on form 20-F, which are all publically available. Please review them as they are directly ethical to every element of this call.

I’d now like to turn the call over to Mr. Stephen Willard, please go ahead sir.

Stephen Willard

Thank you very much Rochelle and good morning ladies and gentlemen. Since our last quarterly call in May we have made important progress as highlighted in the press release detailing our second quarter results we are pleased with the progress that we have made recently particularly in the work we are undertaking with Merck Serono and Pfizer as well as a number of our other partners.

Excluding currency impacts we increased cash reserves during the second quarter. We maintain our cash reserves in Euros so as to match our expenditures.

Operationally we are pleased to announce the addition of three new programs as detailed in yesterday’s press release. Two of these programs are with a single partner for the development of controlled release formulations for cardiovascular drugs using our Micropump platforms.

The third program is for a Medusa enabled control release combination formulation of two molecules, one peptide and one protein. This program is being conducted with a new partner which is a top 20 pharmaceutical company.

I would now like to as Sian Crouzet to discuss our second quarter financial results and then I will expound on these remarks followed by the usual question and answer period, Sian.

Sian Crouzet

Thank you, Steve and good morning. As successful from yesterday’s press release our cash and marketable securities grew in the second quarter were around $1.6 million excluding currency translation effects.

This was as a result of the R&D tax credit that we received from the French Government during the quarter. This credit is effectively earned at the rate of 30% on the volume of research and development expenditure conducted by the company.

Total revenue during the second quarter was $7.5 million compared with $9.6 million in the year ago period.

License and research revenues were $3.3 million compared to $4.3 million in the second quarter of 2009.

As many of you know our development program often involves periods where work is less intensive than at other times. Such as win products and sick clinic. Currently we have 5 projects in clinic. That said our focus for the rest of the year is to increase revenues to a more normalized level.

Product [indiscernible] [0:03:38] relating to the production of COREG CR micro particles were $1.9 million compared with $2.5 million in 2009.

Other revenues which are primarily royalties on the sales of COREG CR were $2.4 million compared with $2.7 million in the year ago period.

Costs and expense declined year on year by $1 million. This decline was across all three categories as we maintain our commitment to strict cost control.

Production costs in line with ongoing demand from $1.9 million in the second quarter of 2009 to $1.6 million in the present period.

R&D declined to a lesser extent. As we continue our investments in this critical activities to support our project [indiscernible] [0:04:35]. And SGNA declined from $3.3 million to $2.8 million.

Our net loss for the quarter was $4.3 million compared with $3.6 million in the same period as last year. And our net loss per share was $0.18 compared to $0.16 in the second quarter 2009.

And with that I’ll now turn the call back over to Steve.

Stephen Willard

Thank you very much Sian, the continued progress that we have made this year on a variety of programs has created an unprecedented set of opportunities for Flamel.

We currently are engaged in discussions with a number of our pharmaceutical partners further expanding our relationships and we hope to sign license agreements of extend development work based on the positive results in formulation, pre clinical work and clinical work as seen to date.

We continue to enjoy a very strong relationship with Merck Serono and are confident in the progress that we have made in this collaboration. Our expectation remains that we will have an update for investors on that program this summer. We believe that this program has the potential to validate many of the advantages of the Medusa platform particularly with respect to Medusa’s ability to enable the controlled release of a fully bioactive molecule.

Our work with Merck Serono is highly promising we believe and may serve as an important proof of concept for the ability of our platform to deliver important, competitive advantages for existing and null molecules with relatively little development risk.

Another program that I will highlight is the one we originally began with Wyatt which is survived with the merger with Pfizer. Shortly after the merger was complete Pfizer exercised the option to license the Medusa platform for the creation of a controlled released intravenous formulation of a drug that had been previously been part of the Wyatt portfolio of marketed molecules. This work is very exciting and we are pleased to be moving into the next stage of development for the program.

I’d also like to comment briefly on the ongoing trial that the ANRS, that’s the French government agency that we’ve talked about in the past. Is sponsoring of our Interferon-alfa XL for the treatment of Hepatitis C virus in combination with Ribovirus.

This is a 12 week open label study that compares 2 dozes of Interferon-alfa XL versus weight based treatment using [Pegantra]. The three arms all involve genotype 1 patients which is the hardest group of patients with the disease in terms of treatment and these arms are split equally between non-responders and treatment [naiestations]. This trial is follow up to the previous two week phase one B trial which demonstrated the genotype 1 patients administered alfa interferon XL experienced a statistically significant reduction in viral load after two weeks with fewer side effects than patients who had received [Pegantra].

I met with the lead investigator last week and thus far I can say that the preliminary results seem quite encouraging.

We believe that the data we are collecting on the Medusa platform shows that the technology may be used not only to improve dosage, but also to create clinically meaningful advantages per patient where treatment is associated those limiting side effects as is the case with many biologics.

Ultimately we believe that the Medusa platform can help many biologics achieve greater efficacy with greater tolerability.

It has been estimated that the cost of developing a follow one biologic are in the order of 70% of the cost of developing the innovator molecule. It is far from clear that the label of a follow-on biologic could reference the clinical data from trials conducted on the innovator molecule as is the case for standard generics or 505B2 approved products.

For this reason we believe that the real opportunity lies in the creation of better biologics using differentiating technology such as the Medusa platform.

The value proposition that Medusa offers to our partners is the potential to capture market share and we believe the ability to grow the overall demand for the molecules in question. Such attributes should enable our partners to recoup the significant investment needed to develop better biologics and improve profitability. We also believe that the strategy provides substantial de-risking of the process given the extensive safety and toxicology data that are available regarding the Medusa platform and given that we are delivering the unmodified molecule rather than a covalently modified version.

This last point is especially important in so far as we believe that it may speed clinical development and save considerable costs as a result. These advantages that I have just described are the reason that we have been able to further expand our partnering relationships again over the past quarter.

The metrics in our presentation have been updated to reflect the two new Micropump projects as well as the Medusa project for the controlled-release of our combination products with the top twenty pharmaceutical partners.

Our success in attracting these new partners together with the successful work that we have completed on existing projects over the first half of the year promise to drive the results for news that we look forward to sharing with you over the second half.

We wish never to lose sight of the fact that Flamel has developed technology platforms which are now partnered with half of the top pharmaceutical technology companies in the world. I’m unaware of any other proprietary drug delivery technologies which are achieving such wide acceptance.

The development of new and enhanced therapeutic agents is a very careful and time-intensive process but I believe Flamel is very well positioned to capitalize for our shareholders as our formulations move through the development and regulatory process.

And with that we will be very pleased to take your questions.

Question-and-Answer session

Operator

Thank you, (Operator Instructions). And we’ll take our first question from Matt Kaplan with Ladenburg.

Matt Kaplan – Ladenburg

Thanks.

Stephen Willard

Good morning Matt.

Matt Kaplan – Ladenburg

Few questions, congratulations first on designing some more feasibility agreements during the quarter. I want to focus on that announcement a little bit; can you give us any more detail specifically with the agreement on the protein and peptides for the metabolic disease that you said? What…just give us some more color on that, on what that means?

Stephen Willard

Okay, with…basically what that means is it's a very interesting project. Obviously obesity is no pun intended, a huge issue and so a number of companies are working very actively in the space and we are very pleased that one of the leaders in science has developed therapies to deal with this sees the need for our Medusa technology. And so we will be working closely with them as this project goes forward and it is a new relationship which is one that I hope when they see not only what we produce with regard to this formulation but with the strength of our technology it will be a relationship that can be expanded much as our relationships with Pfizer and Glaxo and others have been expanded.

Since…go ahead please.

Matt Kaplan – Ladenburg

Are these proteins and peptides something that’s already in the market?

Stephen Willard

Again in order to maintain our position as the partner to half the industry we need to try to preserve their competitive position so I think I’ve told you as much as I can without making it obvious who our partner are.

Matt Kaplan – Ladenburg

Fair enough. And please give us a sense in terms of dollars, to…for now what this means?

Stephen Willard

Sure. It will initially be a formulation plan subject to a license agreement with an upfront payment and a standard milestone and royalty framework is kind of in place cause if we are successful and they want to go forward with it.

Matt Kaplan – Ladenburg

Okay, fair enough. And okay…go ahead, sorry.

Stephen Willard

Just…since you asked about the others, we so frequently talk about Medusa but I think it's also important to highlight every once in a while the fact that we do have very interesting technology on the Micropump size, it's not sexy and completely innovative as the Medusa technology in that there are other ways of accomplishing a portion of what we do with Micropump. But we do have a very good technology. We also have unused manufacturing capacity in Pessac and so one of the things we do with this business development matter is to look for areas where we can not only contribute important development work under our technology but also have the opportunity for manufacturing to use our currently unused capacity in Pessac.

And one of the reasons we were pleased with the two agreements on the Micropump side is that it is contemplated that we will be doing cost-cut manufacturing of those products in our Pessac facility.

Matt Kaplan – Ladenburg

And you…in the prepared remarks you said that there were cardiovascular products?

Stephen Willard

Yes, actually yes.

Matt Kaplan – Ladenburg

And are these…can you give us some more color on the types of products? What…are they beta-blockers, are they calcium channel blockers or are they…can you give us a sense of what they are?

Stephen Willard

No. Again we have made a real effort with our partners to try to increase the visibility of the number of names and the quality of our partners. We have made some progress in terms of getting information about the specific molecules we’re working on. It is my hope that in the coming weeks we will increase the number of…we will increase disclosure of some of the actual molecules that we’ve been working on but this is a brand new project and so we will work over time to see what additional information that we can provide with the regard to the two new Micropump programs.

Operator

(Operator Instruction) Next one moves to David Moskowitz with Madison Williams.

David Moskowitz with Madison Williams

Hey thanks, good morning everyone.

Stephen Willard

Good morning David.

David Moskowitz with Madison Williams

Hey Steve, okay so a couple of different sets of questions first on the numbers so you came up a little bit shy of what we were expecting and it looks like two areas; the license and research revenues and then also the COREG CR manufacturing revenues that you should just call it manufacturing revenues.

Starting with manufacturing revenues, it looks like the way we model that is off of COREG CR and you are running at about 4.5 % 2008, 4.5% 2009 and the first quarters consistently and then it's kind of dropped off to about a 3% number. Is that something that’s going to continue on at this rate? And what sort of the pauses and polls on this number?

Stephen Willard

I think what you’re probably doing and there’s no better way to it than you’re doing it is assuming basically constant treatment quarter-over-quarter and the reality is that we have ups and downs as dictated by GSK in our production schedule.

The batches were somewhat lower in the second quarter. We expect the batches to be much higher in the second half than they were in the first half and it's just the seasonality thing determined by GSK. And also you’ll remember that with COREG we get the active ingredient from coke, it is filled and packaged, it wasn’t crawly it's now being moved to Misasagi, Canada and also our manufacturing not only depends on demand and seasonality but also the timing of the supply of actives and the packaging and selling time requirements.

Bottom line I think the numbers will be goods for the year but there’ll be movement quarter to quarter. And I think…if I may is that somewhat a similar situation with regards to our R&D and licensing money, it's some…first of all we have a number of projects in the clinic and so there isn’t development work during the time that our product is in the clinic. When it comes out of the clinic and the decision is made to develop it we then put two or three times as many people on to the development plan as we head there in the formulation stage.

And then with regard to some of the licensing agreements, those of you who have followed Flamel will know that in this industry it takes longer than we would expect but we’ve had no disappointments today with regard to our licensing discussions except for the fact that they’re taking longer than we would wish.

So I think the results this quarter did not reflect any adverse events or things that will sort of come away from us but rather timing elements that we expect to see corrected in the next quarter or two.

David Moskowitz with Madison Williams

And with regard to that so are you talking about multiple projects? So could we see a spike in revenue license in research revenue in the third and fourth quarter? And granted, you could see that particularly with one project but my question is specific to…are we could we see that with multiple projects?

Stephen Willard

We have a variety of projects under discussion that could come to fruition in the next six months; a number of projects.

David Moskowitz with Madison Williams

Okay, that sort of…

Stephen Willard

And of course it obviously depends on our partners but again one of the reasons that we continue to drive and drive and drive for diversification is because we feel that the more diversified we are, the greater the odds that these people will give the kind of agreements that will move the needle with regard to our financial results and the confidence of our investors.

David Moskowitz with Madison Williams

Okay. And on specific disclosed partners I guess my question is do you see…which partnerships, which products, which companies do you see giving us some visibility later this year?

Stephen Willard

Yeah, we have…I have said that I expect increased visibility with regard to Merck Serono this summer and as I mentioned in my earlier remarks we continue to believe that we will have that visibility in press release during the…during summer. And then I think the other drivers I think would probably be new licensing agreements in terms of real meaningful disclosure to our shareholders.

David Moskowitz with Madison Williams

And you…so that means conversion form feasibility stage to license agreements; is that what you’re referring to?

Stephen Willard

Both. We are currently in debate…in discussions and negotiations not only with regard to taking existing programs for the next step but we also have negotiations and conversations for things that are not part of the feasibility program right now. One of the things we have always done in the past is license stock technology on a molecule by molecule basis and yet one of the things that we are now willing to explore is the somewhat more comprehensive licensing arrangements to say a group of molecules which may lead to better terms and greater visibility for the investors.

Operator

And next one is Mr. Peter Butler with Glen Hill Investments.

Peter Butler – Glen Hill Investments

Good morning, good morning.

Stephen Willard

Good morning Peter.

Peter Butler – Glen Hill Investments

A couple of things, first is the…it seems like about a year ago you started talking about the applicability of Medusa to delivering of vaccines and at the time as I recall, you had some enthusiasm in your voice. A year has gone by have there been any studies, any progress, any updates?

Stephen Willard

Yes, I’m actually glad you mentioned that because I hadn’t had a chance to talk…I haven’t talked about vaccines for a couple of quarters as you correctly point out. We’ve had a lot of successful vaccines. It's a very exciting area and it is an area where we have had a lot of success in formulation and so far in the testing of those formulations. One of the major exciting things that we can do with our technology is deliver a variety of therapeutic agents on the same strand of poly-glutamate.

You are quite familiar with competitive technology in capsulation form, the chemical modification through poly-ethylene glycol. Those don’t do anything in terms of allowing the delivery of multiple molecules in the same strand and the same formulation.

We, however, can deliver four or five or more agents on the same strand and that is particularly exciting in the vaccine area for a variety of different reasons. And as you know, vaccines is a very significant market right now and it's growing markedly.

We have done a great bit of work with therapeutic vaccines but we’re also getting work with regard to vaccines that can actually…I’m sorry, preventative vaccines, prophylactic vaccines, but we’re also beginning to move not just from prophylactic vaccines to also therapeutic vaccines. And that is a very exciting potential new area of science and we are being given the opportunity to configure to that at the early stages which I find quite exciting.

Peter Butler – Glen Hill Investments

On a slightly different subject of…in the last couple of years it looks like you’ve made a substantial progress developing relationships with the pharmaceutical giants like…I think you’re now partnering with five out of the top ten.

Stephen Willard

You’re correct.

Peter Butler – Glen Hill Investments

And we’ve listened to your presentations for the last couple of years and I guess that we’re all familiar with your model and what you’re trying to do. But I’m wondering, in these relationships with the giants has anything out of the ordinary come up? Something that hasn’t really fit your model or anything you’re particularly excited about? Did something new happen?

Stephen Willard

Yes. The…we have very…we have absolutely a core business that I hope those who have paid…followed Flamel for a period of time understand the core models of developing the technologies, proving their safety and efficacy, getting them accepted by big pharma, strengthening that relationship, eventually trying successfully in a number of cases to create option scenarios between various partners.

But a separate portion of my time is spent trying without impact…any impact on that core model to also look for more noble ways of strengthening our position and showing the power of the technology platforms.

And while it will be premature to discuss where those are, it's absolutely true that without having a change in our core model we’re having economic impact on it. I mean I am very proud that we have not raised money in more than seven years and don’t expect to in the future. Without jeopardizing our financial progress we are exploring some things that I think could if successful bring value to our shareholders outside of the existing models.

Operator

Flamel will take a follow-up question from Matt Kaplan of Ladenburg.

Matt Kaplan – Ladenburg

Hi thanks for taking my follow-up. Just a couple of quick questions; first give us an update on the presentation filing with Mutual and…?

Stephen Willard

Sure, and Michelle could I ask you to suspend the one question and one follow up through to allow Matt to get his questions in as well as the others?

Operator

Yes, no problem.

Stephen Willard

Thank you. With regard to the citizen’s petition, we filed our citizen’s petition that was a response from Mutual. We responded to that, they have not responded to us. We will respond once again to the FDA. All the letters back and forth are part of the public record and I’m probably not supposed to characterize them other than what’s in the public record.

But basically there is… the issue is our technology…our COREG CR was required to deliver a minimum level of active ingredient to people who are a very fragile population. Most…it's most frequently used with congestive heart failure. And when we created our controlled-release formulation we were told by the FDA that the once-a-day had to deliver at least as much as twice-a-day. And the success of our product I think is pretty unique.

There is one generic filer whose name is Mutual, who has put forward a request to be approved for generic. And they have taken the position that unlike Flamel, they should be able to deliver active ingredients which might be substantially less than what we deliver. And we think that that could potentially have issues with the fragile population and so we have sought to make the FDA aware of that in their consideration.

What I tried to do is accurately without sin summarize what is in publicly available documents that have been exchanged with the FDA. I would encourage everyone with an interest in this to not take my summary but rather to go to the actual documents and read them because I think it's a very interesting and important conversation.

Matt Kaplan – Ladenburg

Okay. So the next steps on this process are…you’re preparing a response to…?

Stephen Willard

At some point the FDA will say what it thinks and then that will, depending on what the FDA thinks then Mutual and any potential additional generic filers will be bound by whatever decision the FDA makes. There…in the three years that the product has been on the market the only person to file has been Mutual. But whatever the FDA decides would we would assume apply to Mutual and any filer on generics that might eventually be filed.

Matt Kaplan – Ladenburg

Great, and…another question is could the Pfizer relationship be one of the new I guess agreements that are…licensing agreements that could be announced this year? Or is that already in that stage?

Stephen Willard

Which Pfizer? The Pfizer that I mentioned in my earlier remarks?

Matt Kaplan –Ladenburg

Yeah, that you’re moving into the next step, next stage as you…the Wyatt.

Stephen Willard

That is one of many things that you could hear more about in the coming quarters.

Matt Kaplan – Ladeburg

And just…with respect to your prepared remarks of the Interferon program…you said that preliminary results were encouraging, what are you seeing that’s that encouraging? The side-effects, the efficacy or…what?

Stephen Willard

The side effects I think are incredibly important but I had a very high level of confidence. As you know well perhaps but our other investors are not familiar, basically per relation the alternative controlled-release technology uses the bloodstream as a depot. It's adds a large molecule of poly-ethylene glutamate to the active molecule and then puts a weak force into the bloodstream and it starts to circulate. And the body defense mechanisms go after it in the bloodstream and as a result you get very significant side-effects.

I have seen various studies that suggest that 30% or 40% of people who take treatment for Hepatitis C stop their treatment because the side-effects are just so onerous. One of the clear advantages of Flamel’s Medusa technology is because we use a subcutaneous depot under the skin there is far less interaction with the body’s fluid and defense mechanism. And so you tend to get far, fewer side-effects.

We saw that quite clearly with the phase 1B trial and we are seeing it very, very clearly so far with the phase 2 trial. The other side of the coin of course is better reduction of viral load. And this is very exciting, it's too early for me to comment on it because I have anecdotal evidence from individual patients but there is the careful process of collecting all the data and then applying rigorous statistics to it and so I shouldn’t comment on it too much except that so far on an anecdotal basis we seem to have some confirmation of what we postulated after the phase 1 study. You’ll recall on the phase 1 study on efficacy there appears to be a cumulative effect with regard to increased efficacy in the second week of the two-week study. We actually in a very small population have statistically a significant reduction in viral load.

And on purely anecdotal basis so far it does seem that increased effect over time seems to occurring in some of the patients we’re treating. And again we have both naïve patients, people who’ve never had treatment for Hepatitis C but also full compliment non-responders. And obviously it's way too early to draw conclusions from individual experiences but if we could really help a non-responders on efficacy I think that would be a very exciting possibility and we will know a lot more and we will share some interim results with you as available, but of course the only results that will really matter are when we complete the study due the full statistical review submitted for PR approval and then publish it.

Matt Kaplan – Ladenburg

Okay, since the maximum number of questions has been suspended…

Stephen Willard

Yes.

Matt Kaplan – Ladenburg

The OTC product that you’ve spoken about in the past can you…

Stephen Willard

Yes.

Matt Kaplan – Ladenburg

What’s going on, give us an update there.

Stephen Willard

The clinical results well…actually what I should do is not comment on it until we can do it in an organized way to the extent that I’d like to differ on that until and unless we agree on communication with our partner.

Matt Kaplan – Ladenburg

Thanks for taking all my questions.

Stephen Willard

Thank you very much for the questions Matt.

Operator

And next on mute to a follow up from David Maskowitz with Madison Williams.

David Moskowitz – Madison Williams

Yes actually I have three follow ups given the new rule.

Stephen Willard

Yes.

David Moskowitz – Madison Williams

Okay, so on I was on the Baxter call and they actually mentioned you guys by name with regard to their Factor A products so that was pretty interesting. If I recall there is a decision point I believe at some point later this summer Baxter is going to have to make a choice on whether or not they license that they know it’s effective it’s on the top of the CEO’s mind. On the conference call it sounds good to me, can you gives me a little bit more of an update on what we are expecting? What’s sort of happening within that partnership?

Stephen Willard

When the CEO of Baxter [Klug Flamelan] [Phonetic] [0:30:59] is on conference call the best thing for me to do is keep my mouth shut.

David Moskowitz – Madison Williams

Okay, I guess is the…what I’m expecting which is at some point later this year or late of December whatever, should we expect that there is activity in the Baxter partnership?

Stephen Willard

Yes.

David Moskowitz – Madison Williams

Okay.

Stephen Willard

We are in discussion with Baxter how it all works out is premature to discuss, but we are very pleased with our relationship with them even more pleased that they might mention us in public forum and we are working very actively with them to figure out next steps.

David Moskowitz – Madison Williams

Okay, and so then the only question I have on a follow up that is so far what you guys are seeing related to that project is viable, data is viable at this point.

Stephen Willard

From our perspective yes, but the only that matter is what Baxter wants to do and how much they are willing to pay to do it.

David Moskowitz – Madison Williams

Okay.

Stephen Willard

And those things are controlled, but scientifically we are pleased.

David Moskowitz – Madison Williams

Given that your last answer on the citizen’s petition is viable looks like COREG CR still has some good runway, what is Glaxo doing about this? It actually looks like the sales weren’t bad they are holding up now at roughly $16+ million a quarter, but are going to see more promotion under that product?

Stephen Willard

I think we have to let the citizens’ petition process run its course. While I feel that we are making important points to the FDA, the FDA will make its decision in its own discretion. And I think the results of that will be very important to COREG’s promotion and development.

I think if that issue were resolved in our favor it would certainly make it a much more attractive product to put resources behind and develop. And I would expect that we would have some kind of indication this year from the FDA as to their view of the issues that Mitchell and me have been discussing in the public forum known as the Citizens Division.

David Moskowitz – Madison Williams

Okay, thanks [Sian] that’s all I have.

Stephen Willard

Thank you, David, appreciate the question.

David Moskowitz – Madison Williams

No problem.

Operator

And the next one was to Peter Butler with Glen Hill Investments.

Peter Butler – Glen Hill Investments

Okay, I have a couple of I guess short questions on the same subject. What does the score card look like now on the total number of feasibility studies? And how much are Medusa versus Micropump? And can you further break it down on how many existing drugs versus new entities?

Stephen Willard

Sure, the…first of all I’ll answer your question, but the best I think its 20 Medusas, 6 Micropumps. We have all of the metrics broken down to a bit of an extent although we will continue to make those metrics available. We are going to try to add some new metrics into the process because to some extent we are going through the natural progression that we had always talked about together on these conference calls as where Flamel is going.

When Flamel changed its approach back in 2005, 2006 we went from a wide variety of from 60 polymers none of which had tox and [cassogenisty], but were all intellectually interesting to a focus on a single polymer and we selected and developed that polymer. We then did over a year’s worth of toxicology, [cassogenisity] [Phonetic] and other regulatory work approven.

And then the nest step after that was to convince Big Farmer that it had remarkable qualities to meet the needs of drug delivery for both existing and therapeutic molecules. And we were successful in that and we have now created a very robust foundation programs in a wide variety of therapeutic areas with a wide variety of partners including half of the top companies of the industry.

While I continue to believe that we will add 2 or 3 new projects a quarter on average as we have consistently for the past 2 or 21/2 years I really think that we have met the threshold of getting Big Farmer to recognize, accept and sign up for the use of our technology.

And so I will be increasing focused and I hope to generate the results to increasing focus our investors, not so much on the number of projects and the wide spread degree of acceptance, but rather the money that’s coming out of the program.

So I can go over with you how the existing metrics break out in terms of number of projects, but it is available on the website, it continues to grow and increasingly now we are focused on where things are in the clinical and regulatory process and how we maximize the revenue from our partners to capitalize on our success.

Peter Butler – Glen Hill Investments

In your press release you talked about…you gave a number of 17 billion which looked like it might be the total…the ’09 sales for the products in your feasibility studies that are on the market already.

Stephen Willard

Correct.

Peter Butler – Glen Hill Investments

But it sounded then like you modified that to say that also included the competitive sales in the same category or…

Stephen Willard

Yeah, those are the addressable markets of the currently markets products. And going to your issue of metrics that represents only about a third of our Medusa programs, fully two thirds are for new chemicals entities and we don’t include those in at all because although they are estimates of what new chemical entities can earn on the market we don’t think that it’s appropriate for us to speculate on what kind of business entities our new chemical entities will do.

That $17 billion figure is the addressable markets for the programs that we are working with currently marketed proteins and peptides.

Peter Butler – Glen Hill Investments

Okay. Well then just focusing then on those particular entities, what sort of in your forward planning what sort of royalty rate would you might expect to receive an aggregate for this program if successful?

Stephen Willard

Our pricing structure has evolved over time, the earlier deals that we did were lower in terms of royalties because we had not had the opportunity to prove the success of our technology day in areas like intravenous delivery until we had signed our first project, there are other examples.

Once we have demonstrated success we are much…it’s much easier to get higher levels of remuneration particularly on the on the royalty side and our standard pricing for current deals is mid to high single digit on the Micropump and mid high single to low double digit on the Medusa.

I don’t think when we are doing these kinds of transactions we are licensing our technology, but don’t have control of the molecule that we would ever be able to get more than 15% to 18% just because of the economics of the pharmaceutical business.

Peter Butler – Glen Hill Investments

And then as I understand it the tax rate in France for your business would be approximately 17% and you must have fairly large tax laws carry forwards at this point.

Stephen Willard

You are exactly correct with regard to the tax rate in France and the net operating loss carry forwards which can be used as a credit against either the 17% royalty or other more highly tax income. I would have to check back to the 20th, but I believe its $140 million Sian do you have a…

Sian Crouzet

It’s $144 million.

Stephen Willard

She corrects me that it’s I think it was about $144 million of net operating loss carried forward at the end of last year. Which would be very valuable to potentially acquire, and more hopefully would be used…not for a potential acquirer, but rather to offset the profits that we expect to make.

Peter Butler – Glen Hill Investments

Was that a Freudian slip of the tongue?

Stephen Willard

That was a definite slip of the tongue, which I regret. I don’t think it was Freudian. But yes, I wish that I had led with my statement about using it to offset our future profits, because I’m very hopeful that that will, in fact, be the case.

Peter Butler – Glen Hill Investments

Okay, I guess that last thing in this series is it sounds like if all goes well you bring in a lot of money, but is there some way to put a time in on it. Are you…is the average product in the $17 billion, is this going to take 2 years, 4 years, 6 years to get to the market? Have you looked at the time frame?

Stephen Willard

We do look at the time frame and made some calculations. The issue we face though is each of our 26 or 27 programs is a unique situation in and of itself and so many of the decisions that are made are made by our partners because they are paying for everything and they controlling the process. So we have our set of expectations, but I can really think of a situation where a partner did what we had predicted in an event and it’s an element of our business model. And so as a result we diversify very aggressively particularly with the largest companies who have more levels of approval and various people who want to get their 2 cents in end up taking remarkably longer.

The other thing reason that things sometimes take longer is because we are not just trying to get products on the market that are just as good as something else and maybe take a few…maybe you take fewer pills or fewer shots. We’ve changed our focus from control release to huge reductions in side effect profile and better efficacy and the kind of studies and care that has to be taken to be able to demonstrate particularly better efficacy to the FDA, to Payors and to the peer community naturally takes longer than if you just sort slapping out control release products. And so as a result of our moving to play in truly better projects as a result of our technology we have taken on the disadvantage of the fact that , that takes longer.

Peter Butler – Glen Hill Investments

I’m just curious when I got involved in investing in Flamel I guess I thought that I was looking forward to personally benefiting from appreciation in stock and, but as the years went on I started thinking that maybe my children might actually be the beneficiaries and I have been a bit worried that maybe it’s going to be differed to my grandchildren. So I urge you to pick up the pen and let’s start taking money.

Stephen Willard

And I appreciate that, I can assure that at Flamel our goal is with regard to the present generation and I think we have put together a strong foundation, we have developed formulations well. It is impossible to predict with certainty when products will move forward, but I’m hopeful that the period of time that you have spent with us as we’ve developed this very robust business will be well rewarded in your lifetime.

Peter Butler – Glen Hill Investments

Okay, well thanks for your help.

Stephen Willard

Alright, thank you all very much. And Rochelle [Shentai] went and violated our own rule and took a variety of questions beyond the one and one follow up. I might as well say with your permission thank you very much to those of you who have participated and listened to this call. Thank you very much for your interest in Flamel Technologies and what we are developing. And we look forward to speaking with you again soon.

Operator

And that will conclude today’s call we thank you for your participation.

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