Form
20-F x
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Form
40-F o
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Yes o
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No
x
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Page
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Part
I – FINANCIAL INFORMATION
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Item 1. Condensed
Consolidated Financial Statements (unaudited)
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a)
Condensed Consolidated Statement of Operations for the
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2
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Three
months ended September 30, 2009 and 2008
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b)
Condensed Consolidated Statement of Operations for the
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3
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Nine
months ended September 30, 2009 and 2008
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c)
Condensed Consolidated Balance Sheet as of
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4
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September
30, 2009 and December 31, 2008
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d)
Condensed Consolidated Statement of Cash Flows for the
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5
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Nine
months ended September 30, 2009 and 2008
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d)
Consolidated Statement of Shareholders’ Equity for the
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6
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Nine
months ended September 30, 2009
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e)
Notes to Condensed Consolidated Financial Statements
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7
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Item 2. Management’s
Discussion and Analysis of
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11
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Financial
Condition and Results of Operations
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PART
II – OTHER INFORMATION
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Item
1. Legal Proceedings
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13
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Item
1a. Risk Factors
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14
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Three months ended
September 30,
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2008
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2009
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Revenue:
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License
and research revenue
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$ | 3,140 | $ | 4,726 | ||||
Product
sales and services
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3,023 | 2,651 | ||||||
Other
revenues
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2,972 | 2,521 | ||||||
Total
revenue
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9,135 | 9,898 | ||||||
Costs
and expenses:
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Cost
of goods and services sold
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(2,613 | ) | (2,567 | ) | ||||
Research
and development
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(8,239 | ) | (9,305 | ) | ||||
Selling,
general and administrative
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(2,899 | ) | (3,138 | ) | ||||
Total
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(13,751 | ) | (15,010 | ) | ||||
Loss
from operations
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(4,616 | ) | (5,112 | ) | ||||
Interest
income net
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377 | 92 | ||||||
Foreign
exchange gain (loss)
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220 | (140 | ) | |||||
Other
income
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58 | 4 | ||||||
Loss
before income taxes
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(3,961 | ) | (5,156 | ) | ||||
Income
tax benefit
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1,657 | 1,774 | ||||||
Net
loss
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$ | (2,304 | ) | $ | (3,382 | ) | ||
Loss
per share
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||||||||
Basic
loss per ordinary share
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$ | (0.10 | ) | $ | (0.14 | ) | ||
Diluted
loss per share
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$ | (0.10 | ) | $ | (0.14 | ) | ||
Weighted
average number of shares outstanding (in thousands) :
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Basic
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24,077 | 24,225 | ||||||
Diluted
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24,077 | 24,225 |
Nine months ended September 30,
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2008
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2009
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Revenue:
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||||||||
License
and research revenue
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$ | 9,841 | $ | 16,156 | ||||
Product
sales and services
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10,918 | 7,602 | ||||||
Other
revenues
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8,394 | 7,769 | ||||||
Total
revenue
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29,153 | 31,527 | ||||||
Costs
and expenses:
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||||||||
Cost
of goods and services sold
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(7,263 | ) | (6,508 | ) | ||||
Research
and development
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(26,476 | ) | (26,288 | ) | ||||
Selling,
general and administrative
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(10,659 | ) | (9,371 | ) | ||||
Total
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(44,398 | ) | (42,167 | ) | ||||
Loss
from operations
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(15,245 | ) | (10,640 | ) | ||||
Interest
income net
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1,127 | 349 | ||||||
Foreign
exchange gain (loss)
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76 | (288 | ) | |||||
Other
income
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159 | 13 | ||||||
Loss
before income taxes
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(13,883 | ) | (10,566 | ) | ||||
Income
tax benefit
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4,525 | 4,824 | ||||||
Net
loss
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$ | (9,358 | ) | $ | (5,742 | ) | ||
Loss
per share
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||||||||
Basic
loss per ordinary share
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$ | (0.39 | ) | $ | (0.24 | ) | ||
Diluted
loss per share
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$ | (0.39 | ) | $ | (0.24 | ) | ||
Weighted
average number of shares outstanding (in thousands) :
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||||||||
Basic
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24,066 | 24,217 | ||||||
Diluted
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24,066 | 24,217 |
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December 31,
2008
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September 30,
2009 |
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ASSETS
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||||||||
Current
assets:
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Cash
and cash equivalents
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$ | 27,021 | $ | 4,784 | ||||
Marketable
securities
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10,057 | 44,026 | ||||||
Accounts
receivable
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6,979 | 7,337 | ||||||
Inventory
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1,837 | 2,157 | ||||||
Research
and development tax credit receivable short term
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11,114 | 7,897 | ||||||
Prepaid
expenses and other current assets
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2,181 | 3,038 | ||||||
Total
current assets
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59,189 | 69,239 | ||||||
Property
and equipment, net
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27,601 | 25,936 | ||||||
Other
assets:
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Research
and development tax credit receivable long term
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4,880 | 2,525 | ||||||
Other
long-term assets
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191 | 221 | ||||||
Total
other assets
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5,071 | 2,746 | ||||||
Total
assets
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$ | 91,861 | $ | 97,921 | ||||
LIABILITIES
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Current
liabilities:
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Current
portion of long-term debt
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684 | 720 | ||||||
Current
portion of capital lease obligations
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69 | 29 | ||||||
Accounts
payable
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5,760 | 4,899 | ||||||
Current
portion of deferred revenue
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798 | 4,466 | ||||||
Advances
from customers
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587 | 919 | ||||||
Accrued
expenses
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5,905 | 6,009 | ||||||
Other
current liabilities
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6,452 | 4,442 | ||||||
Total
current liabilities
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20,255 | 21,484 | ||||||
Long-term
debt, less current portion
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2,269 | 2,387 | ||||||
Capital
lease obligations, less current portion
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96 | 78 | ||||||
Deferred
revenue, less current portion
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201 | 5,382 | ||||||
Other
long-term liabilities
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20,494 | 18,520 | ||||||
Total
long-term liabilities
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23,060 | 26,367 | ||||||
Commitments
and contingencies:
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- | - | ||||||
Shareholders'
equity:
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Ordinary
shares: 24,205,350 issued and outstanding at December 31, 2008 and
24,225,350 at September 30, 2009 (28,713,590 authorised - nominal value
0.122 euro )
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3,516 | 3,519 | ||||||
Additional
paid-in capital
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193,085 | 197,456 | ||||||
Accumulated
deficit
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(160,205 | ) | (165,947 | ) | ||||
Accumulated
other comprehensive income
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12,150 | 15,042 | ||||||
Total
shareholders' equity
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48,546 | 50,070 | ||||||
Total
liabilities and shareholders' equity
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$ | 91,861 | $ | 97,921 |
Nine months ended
September 30,
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2008
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2009
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Cash
flows from operating activities:
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Net
loss
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$ | (9,358 | ) | $ | (5,742 | ) | ||
Adjustments
to reconcile net income (loss)
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to
net cash provided by (used in) operating activities:
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Depreciation
of property and equipment
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5,535 | 4,080 | ||||||
Gains
on sales of marketable securities
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(274 | ) | (118 | ) | ||||
Grants
recognized in other income and income from
operations
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(1,408 | ) | (782 | ) | ||||
Stock
compensation expense
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6,246 | 4,314 | ||||||
Increase
(decrease) in cash from:
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Accounts
receivable
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(2,432 | ) | 238 | |||||
Inventory
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41 | (169 | ) | |||||
Prepaid
expenses and other current assets
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91 | (697 | ) | |||||
Research
and development tax credit receivable
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633 | 5,738 | ||||||
Accounts
payable
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(1,206 | ) | (732 | ) | ||||
Deferred
revenue
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(1,885 | ) | 8,039 | |||||
Accrued
expenses
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292 | 90 | ||||||
Other
current liabilities
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376 | 2,360 | ||||||
Other
long-term assets and liabilities
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(1,476 | ) | (2,909 | ) | ||||
Net
cash provided by (used in) operating activities
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(4,825 | ) | 13,710 | |||||
Cash
flows from investing activities:
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Purchases
of property and equipment
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(3,436 | ) | (1,532 | ) | ||||
Proceeds
from sales of marketable securities
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58,105 | 100,651 | ||||||
Purchase
of marketable securities
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(47,280 | ) | (131,347 | ) | ||||
Net
cash provided by (used in) investing activities
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7,389 | (32,228 | ) | |||||
Cash
flows from financing activities:
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Proceeds
from conditional grants
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- | 520 | ||||||
Reimbursment
of loans or conditional grants
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- | (3,998 | ) | |||||
Principal
payments on capital lease obligations
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(89 | ) | (60 | ) | ||||
Cash
proceeds from issuance of ordinary shares and warrants
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540 | 291 | ||||||
Net
cash provided by (used in) financing activities
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451 | (3,247 | ) | |||||
Effect
of exchange rate changes on cash and cash equivalents
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(923 | ) | (472 | ) | ||||
Net decrease
in cash and cash equivalents
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2,092 | (22,237 | ) | |||||
Cash
and cash equivalents, beginning of period
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26,313 | 27,021 | ||||||
Cash
and cash equivalents, end of period
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$ | 28,405 | $ | 4,784 |
Accumulated
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Additional
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Other
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Ordinary Shares
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Paid-in
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Accumulated
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Comprehen-
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Shareholders'
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Shares
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Amount
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Capital
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Deficit
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sive Income
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Equity
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Balance
at January 1, 2009
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24,205,350 | $ | 3,516 | $ | 193,085 | $ | (160,205 | ) | $ | 12,150 | $ | 48,546 | ||||||||||||
Subscription of
warrants
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262 | 262 | ||||||||||||||||||||||
Issuance
of ordinary shares on exercise of stock -options
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20,000 | 3 | 26 | 29 | ||||||||||||||||||||
Stock-based
compensation expense
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4,083 | 4,083 | ||||||||||||||||||||||
Net
loss
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(5,742 | ) | (5,742 | ) | ||||||||||||||||||||
Foreign
currency translation adjustment
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2,892 | 2,892 | ||||||||||||||||||||||
Comprehensive
loss
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$ | (2,850 | ) | |||||||||||||||||||||
Balance
at September 30, 2009
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24,225,350 | $ | 3,519 | $ | 197,456 | $ | (165,947 | ) | $ | 15,042 | $ | 50,070 |
Three months ended
September 30, 2009
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Risk-free
interest rate
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1.35 | % | ||
Dividend
yield
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- | |||
Expected
volatility
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66 | % | ||
Expected
term
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2.5
years
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Forfeiture
rate
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- |
Three months ended
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Nine months ended
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(in thousands except per share data)
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September 30,
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September 30,
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September
30,
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September 30,
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2008
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2009
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2008
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2009
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Net loss
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(2,304 | ) | (3,382 | ) | (9,358 | ) | (5,742 | ) | ||||||||
Net loss per share
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Basic
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$ | (0.10 | ) | $ | (0.14 | ) | $ | (0.39 | ) | $ | (0.24 | ) | ||||
Diluted
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$ | (0.10 | ) | $ | (0.14 | ) | $ | (0.39 | ) | $ | (0.24 | ) | ||||
Number of shares used for computing
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Basic
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24,077 | 24,225 | 24,066 | 24,217 | ||||||||||||
Diluted
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24,077 | 24,225 | 24,066 | 24,217 | ||||||||||||
Stock-based compensation (FAS123R)
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Cost of products and services sold
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82 | 60 | 338 | 171 | ||||||||||||
Research and development
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573 | 565 | 3,137 | 1,791 | ||||||||||||
Selling, general and administrative
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507 | 852 | 2,771 | 2,352 | ||||||||||||
Total
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1,162 | 1,477 | 6,246 | 4,314 | ||||||||||||
Net loss before stock-based compensation
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(1,142 | ) | (1,905 | ) | (3,112 | ) | (1,428 | ) | ||||||||
Net loss before stock-based compensation
per share
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Basic
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$ | (0.05 | ) | $ | (0.08 | ) | $ | (0.13 | ) | $ | (0.06 | ) | ||||
Diluted
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$ | (0.05 | ) | $ | (0.08 | ) | $ | (0.13 | ) | $ | (0.06 | ) |
-
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a
cash outflow from financing activities ($4.0 million), related to the
reimbursement to Oseo for the advance Oseo provided secured against the
R&D tax credit from 2005,
and
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-
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a cash inflow from
operating activities ($4.4 million), corresponding to the R&D credit
tax from 2005 paid by the tax authorities (and a corresponding
decrease in the amount of the R&D tax credit
receivable).
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·
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we
depend on a few customers for the majority of our revenues, and the loss
of any one of these customers could reduce our revenues
significantly;
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·
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our
revenues depend on pharmaceutical and biotechnology companies successfully
developing products that incorporate our drug delivery
technologies;
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·
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although
products that incorporate our drug delivery technologies may appear
promising at their early stages of development and in clinical trials,
none of these potential products may reach the commercial market for a
number of reasons;
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·
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we
must invest substantial sums in research and development in order to
remain competitive, and we may not fully recover these
investments;
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·
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we
depend on key personnel to execute our business plan. If we
cannot attract and retain key personnel, we may not be able to
successfully implement our business
plan;
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·
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products
that incorporate our drug delivery technologies are subject to regulatory
approval. If our pharmaceutical and biotechnology company
partners do not obtain such approvals, or if such approvals are delayed,
our revenues may be adversely
affected;
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·
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we
may face product liability claims related to participation in clinical
trials or the use or misuse of our products or products that incorporate
our technologies;
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·
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commercial
products incorporating our technologies are subject to continuing
regulation, and we and our pharmaceutical and biotechnology company
partners may be subject to adverse consequences if we or they fail to
comply with applicable regulations;
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·
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regulatory
reforms may adversely affect our ability to sell our products
profitably;
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·
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if
our competitors develop and market drug delivery technologies or related
products that are more effective than ours, or obtain regulatory approval
and market such technology or products before we do, our commercial
opportunity will be reduced or
eliminated;
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·
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certain
companies to which we have licensed our technology are subject to
extensive regulation by the FDA and other
regulatory authorities. Their failure to meet strict
regulatory requirements could adversely affect our
business;
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·
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if
we cannot keep pace with the rapid technological change in our industry,
we may lose business;
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·
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our
products and technologies may not gain market
acceptance;
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·
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if we
cannot adequately protect our technology and proprietary information, we
may be unable to sustain a competitive
advantage;.
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·
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third
parties have claimed, and may claim in the future, that our technologies,
or the products in which they are used, infringe on their rights and we
may incur significant costs resolving these
claims;
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·
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if
we or our collaborative partners are required to obtain licenses from
third parties, our revenues and royalties on any commercialized products
could be reduced;
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·
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if
we use biological and hazardous materials in a manner that causes injury,
we may be liable for significant
damages;
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·
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healthcare
reform and restrictions on reimbursements may limit our financial
returns;
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·
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because
we have a limited operating history, investors in our shares may have
difficulty evaluating our
prospects;
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·
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if
we are not profitable in the future, the value of our shares may
fall;
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·
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the
current credit and financial market conditions may exacerbate certain
risks affecting our business;
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·
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we
may require additional financing, which may not be available on favorable
terms or at all, particularly in light of the global economic recession
and its negative effect on the capital markets and which may
result in dilution of our shareholders’ equity
interest;
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·
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our
share price has been volatile and may continue to be
volatile;
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·
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our
operating results may fluctuate, which may adversely affect our share
price;
|
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·
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fluctuations
in foreign currency exchange rates may cause fluctuations in our financial
results.
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Flamel
Technologies, S.A.
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Dated:
15 January, 2010
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/s/ Stephen H.
Willard
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Stephen
H. Willard
|
||
Chief
Executive Officer
|