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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. 7)*
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FLAMEL TECHNOLOGIES S.A.
(Name of Issuer)
ORDINARY SHARES, NOMINAL VALUE (EURO)0.122 PER SHARE
(Title of Class of Securities)
ISIN NO. FR0004018711 (ORDINARY SHARES)
CUSIP 338488109 (ADSs)
(CUSIP Number)(1)
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OSCAR S. SCHAFER
O.S.S. CAPITAL MANAGEMENT LP
598 MADISON AVENUE
NEW YORK, NY 10022
(212) 756-8700
(Name, Address and Telephone Number of Person
Authorized to Receive Notices of Communication)
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JUNE 14, 2005
(Date of Event Which Requires Filing of This Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of ss.ss.240.13d-1(e), 240.13d-1(f) or 240.13d-1(g), check the
following box. [ ]
- --------------------
(1) The Ordinary Shares have no CUSIP number. The ISIN number for the Ordinary
Shares is FR0004018711. The CUSIP number for the ADSs is 338488109.
- -------------------------- --------------------------
CUSIP No. 338488109 13D (PAGE 2 OF 12 PAGES)
ISIN No. FR0004018711
- -------------------------- --------------------------
- -------- -----------------------------------------------------------------------
1 NAME OF REPORTING PERSONS
O.S.S. Capital Management LP
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS
- -------- -----------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [X]
(b) [ ]
- -------- -----------------------------------------------------------------------
3 SEC USE ONLY
- -------- -----------------------------------------------------------------------
4 SOURCE OF FUNDS*
AF
- -------- -----------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEM 2(d) or 2(e) [ ]
- -------- -----------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware, USA
- -------- -----------------------------------------------------------------------
NUMBER OF SHARES 7 SOLE VOTING POWER
0
------ ------------------------------------------------
BENEFICIALLY OWNED BY 8 SHARED VOTING POWER
2,665,947
------ ------------------------------------------------
EACH REPORTING 9 SOLE DISPOSITIVE POWER
0
------ ------------------------------------------------
PERSON WITH 10 SHARED DISPOSITIVE POWER
2,665,947
- -------- -----------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
2,665,947
- -------- -----------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES* [ ]
- -------- -----------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
12.3%
- -------- -----------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
PN
- -------- -----------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
- -------------------------- --------------------------
CUSIP No. 338488109 13D (PAGE 3 OF 12 PAGES)
ISIN No. FR0004018711
- -------------------------- --------------------------
- -------- -----------------------------------------------------------------------
1 NAME OF REPORTING PERSONS
Oscar S. Schafer & Partners I LP
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS
- -------- -----------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [X]
(b) [ ]
- -------- -----------------------------------------------------------------------
3 SEC USE ONLY
- -------- -----------------------------------------------------------------------
4 SOURCE OF FUNDS*
WC
- -------- -----------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEM 2(d) or 2(e) [ ]
- -------- -----------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware, USA
- -------- -----------------------------------------------------------------------
NUMBER OF SHARES 7 SOLE VOTING POWER
0
------ ------------------------------------------------
BENEFICIALLY OWNED BY 8 SHARED VOTING POWER
124,070
------ ------------------------------------------------
EACH REPORTING 9 SOLE DISPOSITIVE POWER
0
------ ------------------------------------------------
PERSON WITH 10 SHARED DISPOSITIVE POWER
124,070
- -------- -----------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
124,070
- -------- -----------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES* [ ]
- -------- -----------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
0.6%
- -------- -----------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
PN
- -------- -----------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
- -------------------------- --------------------------
CUSIP No. 338488109 13D (PAGE 4 OF 12 PAGES)
ISIN No. FR0004018711
- -------------------------- --------------------------
- -------- -----------------------------------------------------------------------
1 NAME OF REPORTING PERSONS
Oscar S. Schafer & Partners II LP
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS
- -------- -----------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [X]
(b) [ ]
- -------- -----------------------------------------------------------------------
3 SEC USE ONLY
- -------- -----------------------------------------------------------------------
4 SOURCE OF FUNDS*
WC
- -------- -----------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEM 2(d) or 2(e) [ ]
- -------- -----------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware, USA
- -------- -----------------------------------------------------------------------
NUMBER OF SHARES 7 SOLE VOTING POWER
0
------ ------------------------------------------------
BENEFICIALLY OWNED BY 8 SHARED VOTING POWER
1,239,507
------ ------------------------------------------------
EACH REPORTING 9 SOLE DISPOSITIVE POWER
0
------ ------------------------------------------------
PERSON WITH 10 SHARED DISPOSITIVE POWER
1,239,507
- -------- -----------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
1,239,507
- -------- -----------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES* [ ]
- -------- -----------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
5.7%
- -------- -----------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
PN
- -------- -----------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
- -------------------------- --------------------------
CUSIP No. 338488109 13D (PAGE 5 OF 12 PAGES)
ISIN No. FR0004018711
- -------------------------- --------------------------
- -------- -----------------------------------------------------------------------
1 NAME OF REPORTING PERSONS
O.S.S. Overseas Fund Ltd
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS
- -------- -----------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [X]
(b) [ ]
- -------- -----------------------------------------------------------------------
3 SEC USE ONLY
- -------- -----------------------------------------------------------------------
4 SOURCE OF FUNDS*
WC
- -------- -----------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEM 2(d) or 2(e) [ ]
- -------- -----------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Cayman Islands
- -------- -----------------------------------------------------------------------
NUMBER OF SHARES 7 SOLE VOTING POWER
0
------ ------------------------------------------------
BENEFICIALLY OWNED BY 8 SHARED VOTING POWER
1,302,370
------ ------------------------------------------------
EACH REPORTING 9 SOLE DISPOSITIVE POWER
0
------ ------------------------------------------------
PERSON WITH 10 SHARED DISPOSITIVE POWER
1,302,370
- -------- -----------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
1,302,370
- -------- -----------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES* [ ]
- -------- -----------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
6.0%
- -------- -----------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
CO
- -------- -----------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
- -------------------------- --------------------------
CUSIP No. 338488109 13D (PAGE 6 OF 12 PAGES)
ISIN No. FR0004018711
- -------------------------- --------------------------
- -------- -----------------------------------------------------------------------
1 NAME OF REPORTING PERSONS
O.S.S. Advisors LLC
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS
- -------- -----------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [X]
(b) [ ]
- -------- -----------------------------------------------------------------------
3 SEC USE ONLY
- -------- -----------------------------------------------------------------------
4 SOURCE OF FUNDS*
AF
- -------- -----------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEM 2(d) or 2(e) [ ]
- -------- -----------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware, USA
- -------- -----------------------------------------------------------------------
NUMBER OF SHARES 7 SOLE VOTING POWER
0
------ ------------------------------------------------
BENEFICIALLY OWNED BY 8 SHARED VOTING POWER
1,363,577
------ ------------------------------------------------
EACH REPORTING 9 SOLE DISPOSITIVE POWER
0
------ ------------------------------------------------
PERSON WITH 10 SHARED DISPOSITIVE POWER
1,363,577
- -------- -----------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
1,363,577
- -------- -----------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES* [ ]
- -------- -----------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
6.3%
- -------- -----------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
OO
- -------- -----------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
- -------------------------- --------------------------
CUSIP No. 338488109 13D (PAGE 7 OF 12 PAGES)
ISIN No. FR0004018711
- -------------------------- --------------------------
- -------- -----------------------------------------------------------------------
1 NAME OF REPORTING PERSONS
Schafer Brothers LLC
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS
- -------- -----------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [X]
(b) [ ]
- -------- -----------------------------------------------------------------------
3 SEC USE ONLY
- -------- -----------------------------------------------------------------------
4 SOURCE OF FUNDS*
AF
- -------- -----------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEM 2(d) or 2(e) [ ]
- -------- -----------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware, USA
- -------- -----------------------------------------------------------------------
NUMBER OF SHARES 7 SOLE VOTING POWER
0
------ ------------------------------------------------
BENEFICIALLY OWNED BY 8 SHARED VOTING POWER
2,665,947
------ ------------------------------------------------
EACH REPORTING 9 SOLE DISPOSITIVE POWER
0
------ ------------------------------------------------
PERSON WITH 10 SHARED DISPOSITIVE POWER
2,665,947
- -------- -----------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
2,665,947
- -------- -----------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES* [ ]
- -------- -----------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
12.3%
- -------- -----------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
OO
- -------- -----------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
- -------------------------- --------------------------
CUSIP No. 338488109 13D (PAGE 8 OF 12 PAGES)
ISIN No. FR0004018711
- -------------------------- --------------------------
- -------- -----------------------------------------------------------------------
1 NAME OF REPORTING PERSONS
Oscar S. Schafer
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS
- -------- -----------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [X]
(b) [ ]
- -------- -----------------------------------------------------------------------
3 SEC USE ONLY
- -------- -----------------------------------------------------------------------
4 SOURCE OF FUNDS*
AF
- -------- -----------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEM 2(d) or 2(e) [ ]
- -------- -----------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware, USA
- -------- -----------------------------------------------------------------------
NUMBER OF SHARES 7 SOLE VOTING POWER
0
------ ------------------------------------------------
BENEFICIALLY OWNED BY 8 SHARED VOTING POWER
2,665,947
------ ------------------------------------------------
EACH REPORTING 9 SOLE DISPOSITIVE POWER
0
------ ------------------------------------------------
PERSON WITH 10 SHARED DISPOSITIVE POWER
2,665,947
- -------- -----------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
2,665,947
- -------- -----------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES* [ ]
- -------- -----------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
12.3%
- -------- -----------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
IN
- -------- -----------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
EXPLANATORY NOTE
This Amendment No. 7 to Schedule 13D ("Amendment No. 7") is being filed on
behalf of Oscar S. Schafer & Partners I LP, a Delaware limited partnership ("OSS
I LP"), Oscar S. Schafer & Partners II LP, a Delaware limited partnership ("OSS
II LP" and together with OSS I LP, the "Limited Partnerships"), O.S.S. Advisors
LLC, a Delaware limited liability company (the "General Partner"), O.S.S.
Overseas Fund Ltd., a Cayman Islands exempted company ("OSS Overseas"), O.S.S.
Capital Management LP, a Delaware limited partnership, (the "Investment
Manager"), Schafer Brothers LLC, a Delaware limited liability company ("SB
LLC"), and Mr. Oscar S. Schafer ("Mr. Schafer", and together with the Limited
Partnerships, the General Partner, OSS Overseas, the Investment Manager and SB
LLC, the "Reporting Persons"), who serves as the senior managing member of the
General Partner and SB LLC. This Amendment No. 7 relates to the ordinary shares,
nominal value (euro)0.122 per share ("Ordinary Shares"), of Flamel Technologies
S.A., a SOCIETE ANONYME organized under the laws of the Republic of France (the
"Issuer"), and amends the Schedule 13D filed with the United States Securities
and Exchange Commission (the "SEC") on April 18, 2005, as amended by Amendment
No. 1, filed with the SEC on April 29, 2005, Amendment No. 2, filed with the SEC
on May 11, 2005, Amendment No. 3, filed with the SEC on May 12, 2005, Amendment
No. 4, filed with the SEC on May 13, 2005, Amendment No. 5, filed with the SEC
on June 2, 2005, and Amendment No. 7, filed with the SEC on June 3, 2005 (as so
amended, the "Original Schedule 13D"). Capitalized terms used in this Amendment
No. 7 but not otherwise defined herein shall have the meanings ascribed to them
in the Original Schedule 13D. Except as amended hereby the Original Schedule 13D
remains in effect.
ITEM 4. PURPOSE OF TRANSACTION
Item 4 of the Original Schedule 13D is amended and supplemented by adding
immediately after the table setting forth the OSS Voting Recommendations the
following text:
On June 8, 2005, Gerard Soula, President and Chief Executive Officer
of the Issuer, issued a further letter to shareholders (the "June 8 Letter"),
which purported to comment on the OSS Letter.
On June 14, 2005, on behalf of the Limited Partnerships and OSS
Overseas, Mr. Schafer sent a letter (the "Second OSS Letter") to Mr. Soula, in
which Mr. Schafer responded to the June 8 Letter. In particular, the Second OSS
Letter took issue with several statements in the June 8 Letter that Mr. Schafer
believed were variously inaccurate, incomplete and/or misleading. The Second OSS
Letter is attached as Exhibit 10 to this Amendment No. 7 and is incorporated
herein by reference.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS
Item 7 of the Original Schedule 13D is amended and restated in its entirety
to read as follows:
The following are filed as exhibits to this statement on Schedule 13D:
- 9 -
Exhibit 1 Joint Filing Agreement (previously filed with the
Original Schedule 13D on April 18, 2005).
Exhibit 2 Notice of Ownership of More than 5% of Share Capital
and Voting Rights Delivered to the Issuer pursuant to
Article L. 233-7 of the French Commercial Code (CODE DE
COMMERCE) (previously filed with Amendment No. 1 to
Schedule 13D on April 29, 2005).
Exhibit 3 Notice of Ownership of More than 10% of Share Capital
and Voting Rights Delivered to the Issuer pursuant to
Article L. 233-7 of the French Commercial Code (CODE DE
COMMERCE) (previously filed with Amendment No. 2 to
Schedule 13D on May 11, 2005).
Exhibit 4 Letter to Gerard Soula, PRESIDENT ET DIRECTEUR GENERAL
of Flamel Technologies S.A. Requiring Inclusion of
Draft Resolutions on Agenda for 2005 Annual General
Meeting pursuant to Article L. 225-105 of the French
Commercial Code (CODE DE COMMERCE) (previously filed
with Amendment No. 4 to Schedule 13D on May 13, 2005).
Exhibit 5 Text of Draft Resolutions to be Proposed at Annual
General Meeting of Shareholders of Flamel Technologies
S.A. (previously filed with Amendment No. 4 to Schedule
13D on May 13, 2005).
Exhibit 6 Biographical Information on Nominees for Directors
(previously filed with Amendment No. 4 to Schedule 13D
on May 13, 2005).
Exhibit 7 Reasons (L'EXPOSE DES MOTIFS) for the Proposed
Resolutions (previously filed with Amendment No. 4 to
Schedule 13D on May 13, 2005).
Exhibit 8 Letter to Gerard Soula, PRESIDENT ET DIRECTEUR GENERAL
of Flamel Technologies S.A., dated June 2, 2005
(previously filed with Amendment No. 5 to Schedule 13D
on June 2, 2005).
Exhibit 9 The OSS Voting Recommendation (previously filed with
Amendment No. 6 to Schedule 13D on June 3, 2005).
Exhibit 10 Letter to Gerard Soula, PRESIDENT ET DIRECTEUR GENERAL
of Flamel Technologies S.A., dated June 14, 2005.
- 10 -
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Dated: June 14, 2005
/s/ Oscar S. Schafer
------------------------------
Oscar S. Schafer, individually
O.S.S. CAPITAL MANAGEMENT LP
By: Schafer Brothers LLC
as General Partner
By: /s/ Oscar S. Schafer
------------------------------
Name: Oscar S. Schafer
Title: Senior Managing Member
OSCAR S. SCHAFER & PARTNERS I LLP
By: O.S.S. Advisors LLC
as General Partner
By: /s/ Oscar S. Schafer
------------------------------
Name: Oscar S. Schafer
Title: Senior Managing Member
OSCAR S. SCHAFER & PARTNERS II LLP
By: O.S.S. Advisors LLC
as General Partner
By: /s/ Oscar S. Schafer
------------------------------
Name: Oscar S. Schafer
Title: Senior Managing Member
- 11 -
O.S.S. OVERSEAS FUND LTD
By: /s/ Oscar S. Schafer
------------------------------
Name: Oscar S. Schafer
Title: Director
O.S.S. ADVISORS LLC
By: /s/ Oscar S. Schafer
------------------------------
Name: Oscar S. Schafer
Title: Senior Managing Member
SCHAFER BROTHERS LLC
By: /s/ Oscar S. Schafer
------------------------------
Name: Oscar S. Schafer
Title: Senior Managing Member
- 12 -
EXHIBIT 10
[Letterhead of O.S.S. Capital Management LP]
June 14, 2005
BY FACSIMILE AND FEDERAL EXPRESS
Gerard Soula
President, Directeur General
Flamel Technologies S.A.
Parc Club du Moulin a Vent
33 avenue du Dr. Georges Levy
69693 Venissieux cedex France
RE: YOUR LETTER TO SHAREHOLDERS DATED JUNE 8, 2005.
Monsieur le President:
I am writing on behalf of Oscar S. Schafer & Partners I LP, Oscar S.
Schafer & Partners II LP and O.S.S. Overseas Fund Ltd (collectively, the "OSS
Shareholders") which acting DE CONCERT, within the meaning of Art. L. 233-10 of
the French Commercial Code, have proposed resolutions for the election of a new
board of directors to be voted on at the Annual Meeting of Shareholders of
Flamel to be held on June 22, 2005 (the "2005 AGM"). The OSS Shareholders are
also, acting DE CONCERT, the largest shareholder in Flamel.
I am writing in response to your letter to your "fellow shareholders" dated
June 8, 2005, in which you make several statements that are variously
inaccurate, incomplete and misleading. Shame on you as a scientist, for
presenting data in the misleading manner that you do. Shame on you as scientist,
for the undisclosed log scale on page 2 of your most recent letter, for the
missing years in the chart on page 3, for your misleading insinuations about the
stock price performance of Enzon under Randy H. Thurman's leadership and, most
disgracefully of all, for the ill-supported aspersions you cast on Elie
Vannier's reputation. Fortunately for us, if not perhaps for you, when a
scientist's conscience fails, we may yet look to libel law or the U.S.
securities laws against misleading disclosure to safeguard truth.
For the benefit of my fellow shareholders, let me set the record straight.
1. You imply that the stock price of Enzon fell under the leadership of
Randy H. Thurman. Not so. Here are the facts:
o Randy H. Thurman was elected Chairman of the Board of Enzon on April
19, 1996. On that date the stock price of Enzon closed at $3.56 per
share.
o Mr. Thurman's successor as Chairman of the Board of Enzon took office
on December 3, 2001. On that date the stock price of Enzon closed at
$57.67 per share.
o This represents an increase in the share price during Mr. Thurman's
tenure as Chairman of over 15 TIMES its value at the start of his
Chairmanship.
What's your point, Dr. Soula? The data don't support your insinuations.
2. You insinuate that there is something to hide in Mr. Vannier's record
and that he is currently the subject of legal action by the AUTORITE DES MARCHES
FINANCIERS (AMF, the French stock market regulator). Not so. The record is clear
that Mr. Vannier violated no law and that he is not currently the subject of any
legal action by the AMF. Again, here are the facts:
o It is true that on April 14, 2003, Elie Vannier was subject to an
administrative sanction by the COMMISSION DES OPERATIONS DE BOURSE, a
predecessor to the AMF, and was fined (euro)15,000.
o The nature of the charges was as follows. It was alleged that on a
telephone call with a financial analyst on August 29, 2000, Mr.
Vannier, then chief financial officer of GrandVision, in the course of
reviewing certain projections that the financial analyst had submitted
to him disclosed non-public financial information ahead of the
publication of GrandVision's half-yearly results on September 6, 2000,
in alleged violation of the rules against selective disclosure. It was
never alleged that Mr. Vannier made any personal profit from this
alleged selective disclosure. CONTRARY TO DR. SOULA'S INSINUATIONS,
HOWEVER, ALL THE ALLEGATIONS AGAINST MR. VANNIER WERE SUBSEQUENTLY
FOUND TO BE BASELESS.
o As is a matter of public record, Mr. Vannier appealed the
administrative decision to the Paris Court of Appeals. On February 24,
2004, the Paris Court of Appeals issued its decision, in which that
Court exonerated Mr. Vannier, overturned the administrative fine of
(euro)15,000 and found that Mr. Vannier had neither disclosed any
specific information to the financial analyst nor disclosed any
information that was not already publicly known. In short, Mr. Vannier
had violated no law. This decision was published in the April 2004
edition of the Monthly Review of the AMF.
o There is NO ongoing legal action by the AMF and this matter is NOT
before the French Courts. The AMF accepted the decision of the Paris
Court of Appeals that Mr. Vannier had violated no law and made no
appeal to the Court of Cassation. The decision of the Paris Court of
Appeal entirely exonerating Mr. Vannier is therefore definitive and
final.
o What is more, in October 2004, the AMF published a very prominent
legend on the summary pages in the forepart of its Monthly Review
announcing that the 2003 administrative sanction against Mr. Vannier
had been overturned and annulled by the Paris Court of Appeals on
February 24, 2004 and that the decision of that court was definitive
and final.
So, Dr. Soula, in answer to your demand, I can inform our fellow
shareholders that the charges made against Mr. Vannier were BASELESS, that
they have been found to be so by a DEFINITIVE DECISION of the Paris Court
of Appeals and the FINAL RESULT of all legal proceedings is that Mr.
Vannier is INNOCENT OF ANY VIOLATION OF ANY LAW. Further, all this
-2-
information is a matter of public record that can be easily researched and
retrieved by a simple internet search using a public search engine.
Shame on you, Dr. Soula, as scientist for failing to conduct even the
simplest background fact check on these baseless charges. Shame on you for
trying save your office at the expense of another man's honor and
reputation.
3. You ask me to share with our fellow shareholders any written
communications I have had from GSK management in respect of their program. I can
assure you that the only written communication I have received from GSK is the
short, two-paragraph letter, dated May 25, 2005, on which you were copied, and
which I have no doubt you solicited. If you are so eager to share this
communication with our fellow shareholders, please go ahead and do so. After
all, you have access to all Flamel's publicity resources (at Flamel's expense,
of course) to support your new-found enthusiasm for shareholder communications.
I am certain that you can disseminate your copy of this letter much more
effectively than I can disseminate my copy. However, the OSS Shareholders do not
think it prudent or appropriate to use such an important Flamel asset as the
existing GSK relationship as if it were just another tool in the fight to save
your office. To quote you: "this information is not, and should not be
disclosed." It is your scaremongering tactics, not the legitimate actions of the
OSS Shareholders in seeking good governance, that have deliberately attempted to
worry Flamel's most significant business partner in order to save your position.
Here, I repeat what I said in my earlier letter. The OSS Shareholders fully
appreciate the need for continuity with respect to Flamel's existing business
relationships with its partners. Neither the OSS Shareholders nor the proposed
board, if elected, has ANY intention of distracting Flamel from fulfilling any
of its obligations under any contract with its existing business partners,
including GSK. Further, I have twice - once in person and once by telephone -
reassured Jean-Pierre Garnier, Chairman and Chief Executive Officer of GSK, that
the GSK contract will remain of the highest priority to Flamel should the
resolutions of the OSS Shareholders succeed. The OSS Shareholders legitimately
seek only to improve the governance of the Company. And the OSS Shareholders
believe that this improved governance will redound to the benefit of all
constituencies - their fellow shareholders, Flamel's employees, and Flamel's
existing and potential partners.
4. To the executives and employees of Flamel, the OSS Shareholders repeat
their commitment to continuity.
Dr. Soula, you alone have promised to resign if the OSS Shareholders'
resolutions are passed. If the proposed board is elected, there will be no
"drive to replace" existing management. With improved governance, the OSS
Shareholders believe that meritocracy will replace nepotism as the guiding
principle of recognition, reward and advancement within the Flamel organization.
Those that owe their job solely to family ties - and I note again that two of
your sons and a daughter-in-law are employed by Flamel - may feel that their
jobs are less secure after the election of the proposed board. However, the many
talented scientists, managers and other employees of Flamel have nothing to fear
from the improved governance that will result from a robustly independent board
capable of supporting and holding senior management to account.
-3-
The unsigned letter from executives praising your "expert management and
guidance" and celebrating you as "essential for the long term success of Flamel"
is so transparently self-serving that it could, in fact, only have been drafted
by you or under your direction. In the improved governance regime that the OSS
Shareholders intend, the Chief Executive Officer will not be able to demand - or
coerce - such abject allegiance.
5. In criticizing my earlier letter, you say that "all [my] comments are
based on wrong or limited information." Not so. All the following statements in
my letter are based on individually demonstrable facts; collectively, they are a
damning indictment of your record as Chairman and CEO of our Company; and none
of them is answered satisfactorily in your letter. Indeed, some: of them are not
even addressed.
o Flamel's stock price fell approximately 66% between September 2003 and
April 2005. On September 19, 2003, the closing price of the ADS was
$42.85. On April 15, 2005, the closing price of the ADS had fallen to
$14.25.
o The dates were not picked to be the lowest of the low and the highest
of the high. In fact, the lowest of the recent lows was $12.25, a
nadir reached with the closing price on April 6, 2005 and representing
a decline of over 71% from September 19, 2003. The April 15, 2005 date
was a principled choice - it was the last trading day before the OSS
Shareholders first announced in their Schedule 13D filing that they
were contemplating action to address the dismal performance of the
stock over the preceding 18 months. In contrast with this principled
approach to the data, it is your presentation that is slippery. Why do
you not at least note the use of the log scale on page 2? As you know,
such a scale has the effect of maximizing the visual impact of gains
from a low base, and minimizing the visual impact of declines from
higher values. Thus, without explanation, the absolute gain of $5 in
stock price between the prices of $5 and $10 per share may appear to
be of the same magnitude as the absolute decline of $20 in stock price
between the prices of $40 and $20 per share.
o On conference calls in 2003 and 2004 you repeatedly set the target
that 1 new Medusa(R) licensing deal and 2 new Micropump(R) licensing
deals would be signed by the end of 2004. You also claimed that Flamel
would develop a third delivery technology to complement the Medusa(R)
and Micropump(R) technologies. As of today, Flamel has a NET LOSS of
one Medusa(R) licensing agreements, NO NET GAIN in Micropump(R)
licensing deals and there is NO SIGN of the third delivery technology.
Why should shareholders continue to believe your recent repeated
claims that Flamel is "on the verge of success" based on "potential
new deals in the near future"?
o Two of your sons and one of your daughters-in-law work at the Company
(one son, in the senior position of director of nanotechnology, is the
beneficiary of significant option grants). You bring a new spin to the
concept "best of breed" as a benchmark for employment decisions.
o There have been six Vice Presidents, Business Development in the last
four years. To paraphrase Oscar Wilde, "To lose one vice president,
Dr. Soula, may be regarded as a misfortune; to lose five looks like
carelessness." Or worse. One begins to suspect that there is more to
this serial failure to hire and retain qualified executives than the
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location of Lyon and the demands of international travel - both
factors that are known at the time the job offer is made and accepted.
Perhaps, Dr. Soula, such executives have found it impossible to work
under you?
o It is the addition of the two new directors to your slate that appears
hastily improvised. As a result, if your slate of directors is
elected, Flamel may lose its status as a "foreign private issuer" as
defined under Rule 3b-4 under the United States Securities Exchange
Act of 1934. Accordingly, Flamel will be subject to different, more
onerous reporting requirements under the United States securities
laws. Complying with these additional and unfamiliar reporting
requirements will itself constitute an unnecessary "distraction" of
scarce management time and resources. And as you yourself urge
shareholders, now is not the time for such distractions.
o Finally, it is simply not true that I "den[y] [your] role in the
success of Flamel today." As I wrote previously, "the OSS Shareholders
do not deny the very significant role that you have played in the
founding of Flamel and the development of its technologies." IT IS
JUST THAT THE CHIEF SCIENTIFIC OFFICER DOES NOT NECESSARILY MAKE THE
BEST CHIEF EXECUTIVE OFFICER, PARTICULARLY WHEN HE IS NOT SUBJECT TO
THE OVERSIGHT OF A ROBUSTLY INDEPENDENT BOARD. Despite your recent
conversion to the rhetoric of shareholder value, the outpouring of
fraternity for your "fellow shareholders", and your almost daily
communications, the facts are that for too long you have treated
Flamel as if it were your own company in respect of which you were
accountable to nobody, neither the board of directors nor the
Company's shareholders.
6. You say that the OSS Shareholders have no plan, no management and no
strategy for Flamel. Again, not so. The OSS Shareholders have a vision of Flamel
run by a professional team of managers, guided and overseen by a robustly
independent board (of which the directors proposed by the OSS Shareholders will
form the nucleus) and managed for the benefit of all shareholders. The OSS
Shareholders agree that the plan must be to maintain the well-trained technical
team at Flamel and to reinforce the business team, in order to commercialize the
superior Flamel technologies. The OSS Shareholders, however, believe that this
successful evolution of Flamel into a COMMERCIAL as well as a technological
success story will be most effectively accomplished under the guidance of a new
board of directors.
* * * * * *
Ironically, given the criticism you level at me, it is your letter that
indulges in personal and unsupported attacks on Mr. Thurman and Mr. Vannier. It
is your letter that hides behind anonymous informers, an unsigned letter and
unsubstantiated insinuation. As demonstrated by your cynical and clumsy attempts
to orchestrate the support of your executive management and even GSK, Flamel's
most important business partner, in order to save your own offices, no tactic
appears beneath your desperation. Even the facts are sacrificed to the goal of
preserving your incumbency. We shall tally by the shareholder vote those who
have been persuaded by the factual record that I have presented here and in my
previous letter and those that are still convinced by your optimistic boasts,
which are no less self-serving for being couched in your new-found rhetoric of
shareholder value.
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I for one look forward to the shareholder meeting in Lyon on June 22.
Very truly yours,
/s/ Oscar S. Schafer
--------------------------------------
Oscar S. Schafer, individually, and
(1) as senior managing member of:
(a) O.S.S. Advisors LLC, for itself and as
the general partner of
(i) Oscar S. Schafer & Partners I LP;
and
(ii) Oscar S. Schafer & Partners II LP;
and
(b) Schafer Brothers LLC, for itself and as
the general partner of
O.S.S. Capital Management LP
and
(2) as director of O.S.S. Overseas Fund Ltd.
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