Still Bullish On Flamel, Despite Last Week's Bad News

| About: Avadel Pharmaceuticals (AVDL)
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Shares in Flamel Technologies (FLML) slipped last week, following word that Glaxo (NYSE:GSK) sold only $20 million in Coreg CR in its second quarter.

In its 2Q earnings conference call, GSK said sales momentum was lost for Coreg CR when its sales forces, which are the same ones that are responsible for detailing the diabetes treatment, Avandia, had their attention turned in June to defending the Avandia franchise, worries about alleged increases in the risk of heart attacks.

The Company now has made adjustments in its field force coverage, and has about 2,000 reps with Coreg CR in a first position, which should give it the promotional visibility it will need as Coreg IR moves closer to the anticipated launch of the first generic carvedilol (expected in September – October 2007).

The renewed sales initiative seems to be paying dividends: (i) key commercial insurance plans have now moved Coreg CR into a tier 2 coverage; (ii) based on the most recent retail prescription data, Coreg CR now represents about 21% of new prescriptions for the total Coreg franchise, up from 11.5% for the week-ended June 22, 2007; and GSK market research indicates that more than 90% of cardiologists have prescribed Coreg CR and expect to increase their future use.

The first patent for Coreg currently expires in September 2007. Although carvedilol is facing imminent generic intrusion, the 10Q Detective believes the franchise still has room for life-cycle management, such as the dosing convenience of switching Coreg to Coreg CR.

Bears may conclude that the Coreg CR numbers miss suggests a repudiation of the commercial appeal of Flamel’s drug-delivery potential. We beg to differ, for strengthening Rx trends and managed-healthcare wins should set the stage for a stronger third quarter.

In addition, the long-term buy thesis for Flamel remains intact, including the Company’s visibility as a potential acquisition by big pharma.

The risk to our bullish argument is that the replacement power of Flamel’s pipeline, should Coreg CR come up short, is still several years away from commercial viability.

Author David J. Phillips holds a long position in Flamel Technologies. The 10Q Detective has a Full Disclosure Policy.

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