UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
______________________
FORM
6-K
Report
of Foreign Private Issuer
Pursuant
to Rule 13a-16 or 15d-16
of
the Securities Exchange Act of 1934
For the
month of January 2011
Commission
File Number 000-28508
Flamel
Technologies
(Translation
of registrant's name into English)
Parc
Club du Moulin à Vent
33
avenue du Dr. Georges Levy
69693
Vénissieux Cedex France
(Address
of principal executive offices)
Indicate by check mark whether the
registrant files or will file annual reports under cover of Form 20-F or Form
40-F.
Form 20-F
x
Form 40-F ¨
Indicate by check mark whether
registrant by furnishing the information contained in this Form is also thereby
furnishing the information to the Commission pursuant to Rule 12g3-2(b) under
the Securities Exchange Act of 1934.
Yes ¨
No x
If "Yes" is marked, indicate below the
file number assigned to the registrant in connection with Rule 12g3-2(b):
82-____________
INDEX
FLAMEL
TECHNOLOGIES S.A.
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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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2
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3
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4
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5
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6
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7
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11
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PART
II – OTHER INFORMATION
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14
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14
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1
FLAMEL
TECHNOLOGIES S.A.
PART 1. FINANCIAL
INFORMATION
Condensed
Consolidated Statement of Operations
(Unaudited)
(Amounts
in thousands of dollars, except per share data)
|
Three months ended
September 30,
|
||||||||
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2009
|
2010
|
|||||||
|
Revenue:
|
||||||||
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License
and research revenue
|
$ | 4,726 | $ | 4,119 | ||||
|
Product
sales and services
|
2,651 | 1,805 | ||||||
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Other
revenues
|
2,521 | 2,117 | ||||||
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Total
revenue
|
9,898 | 8,041 | ||||||
|
Costs
and expenses:
|
||||||||
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Cost
of goods and services sold
|
(2,567 | ) | (1,535 | ) | ||||
|
Research
and development
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(7,531 | ) | (6,702 | ) | ||||
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Selling,
general and administrative
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(3,138 | ) | (2,931 | ) | ||||
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Total
|
(13,236 | ) | (11,168 | ) | ||||
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Loss
from operations
|
(3,338 | ) | (3,127 | ) | ||||
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Interest
income net
|
92 | 109 | ||||||
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Foreign
exchange gain (loss)
|
(140 | ) | (302 | ) | ||||
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Other
income
|
4 | 5 | ||||||
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Loss
before income taxes
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(3,382 | ) | (3,315 | ) | ||||
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Income
tax benefit (expense)*
|
- | (24 | ) | |||||
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Net
loss
|
$ | (3,382 | ) | $ | (3,339 | ) | ||
|
Loss
per share
|
||||||||
|
Basic
loss per ordinary share
|
$ | (0.14 | ) | $ | (0.14 | ) | ||
|
Diluted
loss per share
|
$ | (0.14 | ) | $ | (0.14 | ) | ||
|
Weighted
average number of shares outstanding (in thousands) :
|
||||||||
|
Basic
|
24,225 | 24,423 | ||||||
|
Diluted
|
24,225 | 24,423 | ||||||
*
Research tax credit reclassified in operational expenses for 2009
See notes
to condensed consolidated financial statements
2
FLAMEL
TECHNOLOGIES S.A.
PART 1. FINANCIAL
INFORMATION
Condensed
Consolidated Statement of Operations
(Unaudited)
(Amounts
in thousands of dollars, except per share data)
|
Nine months ended
September 30,
|
||||||||
|
2009
|
2010
|
|||||||
|
Revenue:
|
||||||||
|
License
and research revenue
|
$ | 16,156 | $ | 10,865 | ||||
|
Product
sales and services
|
7,602 | 5,970 | ||||||
|
Other
revenues
|
7,769 | 6,808 | ||||||
|
Total
revenue
|
31,527 | 23,643 | ||||||
|
Costs
and expenses:
|
||||||||
|
Cost
of goods and services sold
|
(6,508 | ) | (5,045 | ) | ||||
|
Research
and development
|
(21,464 | ) | (21,824 | ) | ||||
|
Selling,
general and administrative
|
(9,371 | ) | (8,659 | ) | ||||
|
Total
|
(37,343 | ) | (35,528 | ) | ||||
|
Loss
from operations
|
(5,816 | ) | (11,885 | ) | ||||
|
Interest
income net
|
349 | 326 | ||||||
|
Foreign
exchange gain (loss)
|
(288 | ) | (87 | ) | ||||
|
Other
income
|
13 | 93 | ||||||
|
Loss
before income taxes
|
(5,742 | ) | (11,553 | ) | ||||
|
Income
tax benefit (expense)*
|
- | (100 | ) | |||||
|
Net
loss
|
$ | (5,742 | ) | $ | (11,653 | ) | ||
|
Loss
per share
|
||||||||
|
Basic
loss per ordinary share
|
$ | (0.24 | ) | $ | (0.48 | ) | ||
|
Diluted
loss per share
|
$ | (0.24 | ) | $ | (0.48 | ) | ||
|
Weighted
average number of shares outstanding (in thousands):
|
||||||||
|
Basic
|
24,217 | 24,391 | ||||||
|
Diluted
|
24,217 | 24,391 | ||||||
*
Research tax credit reclassified in operational expenses for 2009
See notes
to condensed consolidated financial statements
3
FLAMEL
TECHNOLOGIES S.A.
(Unaudited)
(Amounts
in thousands of dollars, except share data)
|
December31,
2009
|
September
30,
2010
|
|||||||
|
ASSETS
|
||||||||
|
Current
assets:
|
||||||||
|
Cash
and cash equivalents
|
$ | 8,716 | $ | 3,909 | ||||
|
Marketable
securities
|
35,352 | 28,132 | ||||||
|
Accounts
receivable
|
8,675 | 10,227 | ||||||
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Inventory
|
1,072 | 1,070 | ||||||
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Research
and development tax credit receivable short term
|
9,400 | 2,353 | ||||||
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Prepaid
expenses and other current assets
|
3,626 | 4,555 | ||||||
|
Total
current assets
|
66,841 | 50,246 | ||||||
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Property
and equipment, net
|
24,759 | 22,677 | ||||||
|
Other
assets:
|
||||||||
|
Research
and development tax credit receivable long term
|
2,484 | 4,272 | ||||||
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Other
long-term assets
|
212 | 189 | ||||||
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Total
other assets
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2,696 | 4,461 | ||||||
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Total
assets
|
$ | 94,296 | $ | 77,384 | ||||
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LIABILITIES
|
||||||||
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Current
liabilities:
|
||||||||
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Current
portion of long-term debt
|
862 | 2,158 | ||||||
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Current
portion of capital lease obligations
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33 | 34 | ||||||
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Accounts
payable
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6,366 | 5,156 | ||||||
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Current
portion of deferred revenue
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3,862 | 2,529 | ||||||
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Advances
from customers
|
851 | 4,488 | ||||||
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Accrued
expenses
|
6,318 | 5,974 | ||||||
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Other
current liabilities
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4,604 | 4,023 | ||||||
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Total
current liabilities
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22,896 | 24,362 | ||||||
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Long-term
debt, less current portion
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2,944 | 1,789 | ||||||
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Capital
lease obligations, less current portion
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66 | 35 | ||||||
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Deferred
revenue, less current portion
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6,033 | 3,715 | ||||||
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Other
long-term liabilities
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17,494 | 14,015 | ||||||
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Total
long-term liabilities
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26,537 | 19,554 | ||||||
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Commitments
and contingencies:
|
- | - | ||||||
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Shareholders'
equity:
|
||||||||
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Ordinary
shares: 24,342,600 issued and outstanding at December 31, 2009 and
24,422,600 at September 30, 2010 (shares authorised 29,650,790) at nominal
value of 0.122 euro
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3,540 | 3,553 | ||||||
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Additional
paid-in capital
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198,498 | 201,571 | ||||||
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Accumulated
deficit
|
(171,644 | ) | (183,297 | ) | ||||
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Accumulated
other comprehensive income (loss)
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14,469 | 11,641 | ||||||
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Total
shareholders' equity
|
44,863 | 33,468 | ||||||
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Total
liabilities and shareholders' equity
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$ | 94,296 | $ | 77,384 | ||||
See notes
to condensed consolidated financial statements
4
|
Nine months ended September 30,
|
||||||||
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2009
|
2010
|
|||||||
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Cash
flows from operating activities:
|
||||||||
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Net
income (loss)
|
$ | (5,742 | ) | $ | (11,653 | ) | ||
|
Adjustments
to reconcile net income (loss)
|
||||||||
|
to
net cash provided by (used in) operating activities:
|
||||||||
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Depreciation
of property and equipment
|
4,080 | 3,525 | ||||||
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Gains
on sales of marketable securities
|
(118 | ) | (59 | ) | ||||
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Grants
recognized in other income and income from operations
|
(782 | ) | (828 | ) | ||||
|
Stock
compensation expense
|
4,314 | 2,328 | ||||||
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Increase
(decrease) in cash from:
|
||||||||
|
Accounts
receivable
|
238 | (1,843 | ) | |||||
|
Inventory
|
(169 | ) | (36 | ) | ||||
|
Prepaid
expenses and other current assets
|
(697 | ) | (315 | ) | ||||
|
Research
and development tax credit receivable
|
5,738 | 4,355 | ||||||
|
Accounts
payable
|
(732 | ) | (382 | ) | ||||
|
Deferred
revenue
|
8,039 | (3,015 | ) | |||||
|
Accrued
expenses
|
90 | 3,447 | ||||||
|
Other
current liabilities
|
2,360 | (298 | ) | |||||
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Other
long-term assets and liabilities
|
(2,909 | ) | (671 | ) | ||||
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Net
cash provided by (used in) operating activities
|
13,710 | (5,445 | ) | |||||
|
Cash
flows from investing activities:
|
||||||||
|
Purchases
of property and equipment
|
(1,532 | ) | (3,253 | ) | ||||
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Purchase
of marketable securities
|
(131,347 | ) | (65,705 | ) | ||||
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Proceeds
from sales of marketable securities
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100,651 | 70,727 | ||||||
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Net
cash provided by (used in) investing activities
|
(32,228 | ) | 1,769 | |||||
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Cash
flows from financing activities:
|
||||||||
|
Proceeds
from loans or conditional grants
|
520 | 318 | ||||||
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Reimbursement
of loans or conditional grants
|
(3,998 | ) | (1,879 | ) | ||||
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Principal
payments on capital lease obligations
|
(60 | ) | (24 | ) | ||||
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Cash
proceeds from issuance of ordinary shares and warrants
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291 | 627 | ||||||
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Net
cash provided by (used in) financing activities
|
(3,247 | ) | (958 | ) | ||||
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Effect
of exchange rate changes on cash and cash equivalents
|
(472 | ) | (173 | ) | ||||
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Net
increase (decrease) in cash and cash equivalents
|
(22,237 | ) | (4,807 | ) | ||||
|
Cash
and cash equivalents, beginning of period
|
27,021 | 8,716 | ||||||
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Cash
and cash equivalents, end of period
|
$ | 4,784 | $ | 3,909 | ||||
See notes
to condensed consolidated financial statements
5
FLAMEL
TECHNOLOGIES S.A.
(Amounts
in thousands of dollars)
|
Ordinary
Shares
|
Additional
|
Accumulated
Other
Comprehen-
|
||||||||||||||||||||||
|
Shares
|
Amount
|
Paid-in
Capital
|
Accumulated
Deficit
|
sive
Income
(Loss)
|
Shareholders'
Equity
|
|||||||||||||||||||
|
Balance
at January 1, 2010
|
24,342,600 | $ | 3,540 | $ | 198,498 | $ | (171,644 | ) | $ | 14,469 | $ | 44,863 | ||||||||||||
|
Subscription
of warrants
|
224 | 224 | ||||||||||||||||||||||
|
Issuance
of ordinary shares on exercise of stock -options
|
40,000 | 7 | 396 | 403 | ||||||||||||||||||||
|
Issuance
of ordinary shares on vesting of free shares
|
40,000 | 6 | (6 | ) | - | |||||||||||||||||||
|
Stock-based
compensation expense
|
2,459 | 2,459 | ||||||||||||||||||||||
|
Net
loss
|
(11,653 | ) | (11,653 | ) | ||||||||||||||||||||
|
Foreign
currency translation adjustment
|
(2,828 | ) | (2,828 | ) | ||||||||||||||||||||
|
Comprehensive
loss
|
$ | (14,481 | ) | |||||||||||||||||||||
|
Balance
at September 30, 2010
|
24,422,600 | $ | 3,553 | $ | 201,571 | $ | (183,297 | ) | $ | 11,641 | $ | 33,468 | ||||||||||||
See notes
to condensed consolidated financial statements
6
1.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
In the
opinion of the management of Flamel Technologies S.A. (the “Company”), the
accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with accounting principles generally accepted in the
United States for interim financial statements. Accordingly, these Financial
Statements do not include all of the information and footnotes required for
complete annual financial statements, since certain footnotes and other
financial information required by generally accepted accounting principles in
the United States (US GAAP) can be condensed or omitted for interim reporting
requirements. In the opinion of management, all adjustments (consisting of
only normal recurring accruals) considered necessary for a fair presentation of
our financial position and operating results have been included.
The
preparation of consolidated financial statements in conformity with US GAAP
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the consolidated financial statements, and the
reported amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
Operating
results for the three months ended September 30, 2010 are not necessarily
indicative of the results that may be expected for the full year ending December
31, 2010. These interim condensed consolidated financial statements should be
read in conjunction with the Company's audited annual financial
statements.
The
reporting currency of the Company and its wholly-owned subsidiary is the U.S.
dollar as permitted by the SEC for a foreign private issuer (S-X Rule
3-20(a)). All assets and liabilities in the balance sheets of the Company, whose
functional currency is the Euro, except those of the U.S. subsidiary whose
functional currency is the U.S. dollar, are translated into U.S. dollar
equivalents at exchange rates as follows: (1) asset and liability accounts at
period-end rates, (2) income statement accounts at weighted average exchange
rates for the period, and (3) shareholders' equity accounts at historical rates.
Corresponding translation gains or losses are recorded in shareholders' equity
as Currency Translation Adjustments.
2.
REVENUES
2.1
License and research revenue
The
Company recognized research and development revenues of $7,850,000 for the first
nine months of 2010, including revenues of $2,955,000 pursuant to the agreement
signed with Merck-Serono, $327,000 pursuant to the feasibility agreement signed
with Baxter Pharmaceuticals and additional revenues pursuant to agreements with
other collaborative partners.
Licensing
fees of $3,015,000 were recognized in the first nine months of 2010.
Licensing revenues include amortisation of up-front payments of $987,000
pursuant to the agreement signed with Merck-Serono and $1,690,000 pursuant to
the feasibility agreement signed with Baxter Pharmaceuticals.
7
FLAMEL
TECHNOLOGIES S.A.
Notes
to Condensed Consolidated Financial Statements
(Unaudited)
2.2
Product sales and services.
In
accordance with the supply agreement signed with GSK in December 2004, the
Company recognized revenues of $5,970,000 in the nine months ended September 30,
2010.
2.3
Other revenues.
The
Company recognized other revenues of $6,808,000 for the nine-month period ended
September 30, 2010 which includes royalties from the License Agreement with GSK
with respect to Coreg CR.
3.
RESEARCH TAX CREDIT
The
French government provides tax credits to companies for spending on innovative
research and development. The research tax credit is considered as a grant and
is deducted from operational expenses.
The
credit amounted to $4,138,000 for the nine month period ended September 30, 2010
($1,255,000 for the three-month period then ended), compared to $4,824,000 for
the nine month period ended September 30, 2009 ($1,774,000 for the three month
period then ended).
4.
SHAREHOLDERS' EQUITY
During
the nine month period ended September 30, 2010, the Company issued 40,000 shares
as a result of exercise of stock-options together with 40,000 shares as a result
of vesting of free shares, nominal value €0.122 per share.
5.
STOCK COMPENSATION EXPENSE
During
the nine month period ended September 30, 2010, 30,000 stock options were
granted to certain employees of the Company and 250,000 warrants with a one year
vesting period were subscribed for by directors.
ASC
718-10-S99-1 expresses the view that “the use of a simplified method is not
allowed if the Company may have sufficient historical exercise data for some of
its share options grants and therefore, accepts the use of simplified method for
only some grants but not all share options grants”.
The
Company decided to use the simplified method to estimate the expected term of
the stock-options granted and the warrants subscribed for by directors.
The Company considers that insufficient historical exercise data are available
for stock-options and warrants which are granted to a limited number of
beneficiaries together with few exercises over the past years, in addition, the
vesting schedule and contractual terms having been changed over time for
warrants granted to directors. Consequently, the Company believes that
prior exercise patterns would not reflect accurately future
exercises.
The grant
date fair value of the stock-options granted and warrants subscribed is
calculated using the Black-Scholes option-pricing model with the following
weighted average assumptions.
8
FLAMEL
TECHNOLOGIES S.A.
Notes
to Condensed Consolidated Financial Statements
(Unaudited)
|
Three months ended
September 30, 2010
|
||||
|
Risk-free
interest rate
|
0.95 | % | ||
|
Dividend
yield
|
- | |||
|
Expected
volatility
|
62 | % | ||
|
Expected
term
|
2.9
years
|
|||
|
Forfeiture
rate
|
- | |||
9
FLAMEL
TECHNOLOGIES S.A.
Notes
to Condensed Consolidated Financial Statements
(Unaudited)
Net
income (loss) before and after stock-based compensation is as follows
:
|
Three months ended
|
Nine months ended
|
|||||||||||||||
|
(in thousands except per share data)
|
September
30, 2009
|
September
30, 2010
|
September
30, 2009
|
September
30, 2010
|
||||||||||||
|
Net
income (loss)
|
(3,382 | ) | (3,339 | ) | (5,742 | ) | (11,653 | ) | ||||||||
|
Net
income (loss) per share
|
||||||||||||||||
|
Basic
|
$ | (0.14 | ) | $ | (0.14 | ) | $ | (0.24 | ) | $ | (0.48 | ) | ||||
|
Diluted
|
$ | (0.14 | ) | $ | (0.14 | ) | $ | (0.24 | ) | $ | (0.48 | ) | ||||
|
Number
of shares used for computing
|
||||||||||||||||
|
Basic
|
24,225 | 24,423 | 24,217 | 24,391 | ||||||||||||
|
Diluted
|
24,225 | 24,423 | 24,217 | 24,391 | ||||||||||||
|
Stock-based
compensation (ASC718)
|
||||||||||||||||
|
Cost of products and services sold
|
60 | 31 | 171 | 95 | ||||||||||||
|
Research and development
|
565 | 293 | 1,791 | 874 | ||||||||||||
|
Selling, general and administrative
|
851 | 399 | 2,351 | 1,359 | ||||||||||||
|
Total
|
1,476 | 723 | 4,313 | 2,328 | ||||||||||||
|
Net
income (loss) before stock-based compensation
|
(1,906 | ) | (2,616 | ) | (1,429 | ) | (9,325 | ) | ||||||||
|
Net
income (loss) before stock-based compensation per share
|
||||||||||||||||
|
Basic
|
$ | (0.08 | ) | $ | (0.11 | ) | $ | (0.06 | ) | $ | (0.38 | ) | ||||
|
Diluted
|
$ | (0.08 | ) | $ | (0.11 | ) | $ | (0.06 | ) | $ | (0.38 | ) | ||||
10
FLAMEL
TECHNOLOGIES S.A.
FORWARD-LOOKING
STATEMENTS
This
report on Form 6-K contains forward-looking statements. We may make additional
written or oral forward-looking statements from time to time in filings with the
Securities and Exchange Commission or otherwise. The words ‘believe,’ ‘will’,
‘expect,’ ‘anticipate,’ ‘project’ and similar expressions identify
forward-looking statements, which speak only as of the date the statement is
made. Such forward-looking statements are within the meaning of that term in
Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. Although we believe that our expectations are
based on reasonable assumptions within the bounds of our knowledge of our
business and operations, our business is subject to significant risks and there
can be no assurance that actual results of our development and manufacturing
activities and our results of operations will not differ materially from our
expectations.
Forward-looking statements are subject to inherent risks and
uncertainties, some of which cannot be predicted or quantified. Future events
and actual results could differ materially from those set forth in, contemplated
by or underlying the forward-looking statements. We undertake no obligation to
update these forward-looking statements as a result of new information, future
events or otherwise. You should not place undue reliance on these forward
looking statements. Factors that could cause actual results to differ from
expectations include, among others, those listed in Part II, Item 1A, Risk
Factors of this Form 6-K and set forth in more detail in “Risk Factors” in our
Form 20-F for the fiscal year ended December 31, 2009.
RESULTS
OF OPERATIONS
For the
nine months ended September 30, 2010, Flamel reported total revenues of $23.6
million compared to $31.5 million for the first nine months of 2009, a decrease
driven primarily by the absence in 2010 of a milestone payment from
GlaxoSmithKline (GSK) received in 2009 (as discussed below) and lower royalties
from the sale of CoregCR.
License
and research revenues for the nine months ended September 30, 2010 were $10.9
million compared to $16.2 million for the first nine months of 2009, a decrease
primarily driven by the absence in 2010 of the milestone payment of $4.0 million
from GlaxoSmithKline (GSK) recognized in the first quarter of 2009.
Product
sales and services, pursuant to the Company’s supply contract with GSK totaled
$6.0 million for the nine months ended September 30, 2010, compared to
$7.6 million for the nine months ended September 30, 2009. This decrease
was due primarily to lower market demand for Coreg CR.
Other
revenues were $6.8 million for the nine months ended September 30, 2010 compared
to $7.8 million for the first nine months of 2009. These revenues are
derived primarily from the royalty on sales of Coreg CR.
11
FLAMEL TECHNOLOGIES S.A.
Operational
expenses were $35.5 million during the nine months ended September 30, 2010, a
decline of $1.8 million as compared to $37.3 million for the nine months ended
September 30, 2009. This decrease was due primarily to lower production costs
due to lower demand for Coreg CR.
Costs of
goods and services sold were $5.0 million in the nine months ended September 30,
2010, as compared to $6.5 million in the nine months ended September 30,
2009. This decrease was due to reductions in 2010 expenditures to
correspond with lower demand for Coreg CR.
Research
and development expenditures were $21.8 million in the nine months ended
September 30, 2010 compared to $21.5 million in the nine months ended September
30, 2009.
Selling,
General and Administrative expenses decreased to $8.7 million in the nine months
ended September 30, 2010 compared to $9.4 million in the nine months ended
September 30, 2009, in a continued effort to control expenditures.
Net loss
for the nine months ended September 30, 2010 was $(11.7) million, compared to a
net loss of $(5.7) million in the nine months ended September 30, 2009. Net loss
per share (basic) for the nine months ended September 30, 2010 was $(0.48),
compared to a net loss per share in the year-ago period of $(0.24).
LIQUIDITY
AND CAPITAL RESOURCES
On
September 30, 2010, the Company had $32.0 million in cash, cash equivalents and
marketable securities, compared to $44.1 million on December 31, 2009.
This decrease was due primarily to use of cash and cash equivalents to fund
operations and ongoing research and development activities. In recent
years, we have financed our operations and research and development efforts
primarily by license and research revenues, milestone payments and royalties
from our collaborative partners.
In
December 2008, the Company obtained an advance from OSEO, a French governmental
agency supporting innovation, for $8.0 million secured against the research tax
credits due to the Company by French tax authorities for research expenditures
incurred in 2005, 2006 and 2007.
During
the first quarter of 2010, the French tax authorities paid the Company the
research tax credit from 2006 and the Company repaid to OSEO the corresponding
advance. This resulted in:
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a
cash outflow from financing activities of $1.9 million, related to the
reimbursement to OSEO for the
advance OSEO provided
secured against the research tax credit from 2006,
and
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a cash inflow from
operating activities of $2.3 million, corresponding to the research tax
credit from 2006 paid by the tax authorities (and a corresponding
decrease in the amount of the research tax credit
receivable).
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During
the second quarter of 2010, we received reimbursement of the 2009 research tax
credit from the French tax authorities amounting to $6.0 million.
12
FLAMEL TECHNOLOGIES S.A.
We
believe the Company to have sufficient funds to finance operations and cash
requirements for at least the next twelve months. Our cash needs may vary
materially from our current expectations based on:
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sales of products that
incorporate our drug delivery
technologies;
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financial terms of collaborative,
technology access, license or other commercial agreements we enter
into;
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results of research and
development efforts;
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technological advances;
and
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results of clinical testing,
requirements of the US Food and Drug Administration (FDA) and comparable
foreign regulatory agencies.
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13
FLAMEL TECHNOLOGIES S.A.
PART II. OTHER
INFORMATION
While we
may be engaged in various claims and legal proceedings in the ordinary course of
business, we are not involved (whether as a defendant or otherwise) in and we
have no knowledge of any threat of, any litigation, arbitration or
administrative or other proceeding which management believes will have a
material adverse effect on our consolidated financial position or results of
operations.
On
November 9, 2007 a putative class action was filed in the United States District
Court for the Southern District of New York against the Company and certain of
its current and former officers entitled Billhofer v. Flamel Technologies, et
al. The complaint purports to allege claims arising under the Securities
Exchange Act of 1934 based on certain public statements by the Company
concerning, among other things, a clinical trial involving Coreg CR and seeks
the award of damages in an unspecified amount. By Order dated February 11,
2008, the Court appointed a lead plaintiff and lead counsel in the action.
On March 27, 2008, the lead plaintiff filed an amended complaint which continued
to name as defendants the Company and two previously named officers and asserted
the same claims based on the same events as alleged in the initial
complaint. On May 12, 2008, the Company filed a motion to dismiss the
action, which the Court denied by Order dated October 1, 2009. The action
then proceeded into the discovery phase, pursuant to a schedule approved by the
Court in a Case Management Order, signed December 9, 2009. On April 29,
2010, the lead plaintiff moved to withdraw and substitute another individual as
lead plaintiff and to amend the Case Management Order. On September
20, 2010, the Court granted that motion and on September 30, 2010, the Court
approved an Amended Case Management Order. The parties are now pursuing
further discovery consistent with the schedule set forth in that Order.
The Company believes the complaint to be without merit and intends to vigorously
defend itself in the action.
Set forth
below and in our Annual Report on Form 20-F for the year ended December 31, 2009
is a discussion of risks related to our industry and our business. In addition
to the other information in our SEC filings, you should consider carefully the
following risk factors. The occurrence of any one or more of the risks or
uncertainties described below could have a material adverse effect on business,
financial condition and results of operations:
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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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our
revenues depend on pharmaceutical and biotechnology companies successfully
developing products that incorporate our drug delivery
technologies;
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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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14
FLAMEL
TECHNOLOGIES S.A.
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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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we
depend upon a single site to manufacture our products, and any
interruption of operations could have a material adverse effect on our
business;
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we
depend on a limited number of suppliers for certain raw materials used in
our products, and any failure to deliver sufficient supplies could
interrupt our production process and could have a material adverse affect
on our business;
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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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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 diminished or
eliminated;
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if
we cannot keep pace with the rapid technological change in our industry,
we may lose business, and our drug delivery systems could become obsolete
or noncompetitive;
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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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our
products and technologies may not gain market
acceptance;
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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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if
our third party collaborative partners face generic competition for their
products, our revenues and royalties from such products may be adversely
affected;
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healthcare
reform and restrictions on reimbursements may limit our financial
returns;
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ongoing
current credit and financial market conditions may exacerbate certain
risks affecting our business;
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fluctuations
in foreign currency exchange rates may cause fluctuations in our financial
results;
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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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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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regulatory
reforms may adversely affect our ability to sell our products
profitably;
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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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15
FLAMEL
TECHNOLOGIES S.A.
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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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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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if
we use biological and hazardous materials in a manner that causes injury,
we may be liable for significant
damages;
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our
share price has been volatile and may continue to be
volatile;
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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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if
we are not profitable in the future, the value of our shares may
fall;
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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 slow global economic
recovery and its negative effect on the capital markets, and which
may result in dilution of our shareholders’ equity
interest;
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our
operating results may fluctuate, which may adversely affect our share
price;
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we
are subject to different corporate disclosure standards that may limit the
information available to holders of our
ADSs;
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we
currently do not intend to pay dividends, and cannot assure shareholders
that we will make dividend payments in the
future;
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judgments
of United States courts, including those predicated on the civil liability
provisions of the federal securities laws of the United States, may not be
enforceable in French courts;
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holders
of ADSs have fewer rights than shareholders and have to act through the
Depositary to exercise those
rights;
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preferential
subscription rights may not be available for United States persons;
and
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our
largest shareholders own a significant percentage of the share capital and
voting rights of the Company;
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16
SIGNATURES
Pursuant to the requirements of the
Securities Exchange Act of 1934, the registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly
authorized.
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Flamel
Technologies, S.A.
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Dated:
January 21, 2011
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/s/ Stephen H. Willard
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Stephen
H. Willard
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Chief
Executive Officer
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17