From Flameout to Bargain

The stock of biopharmaceutical and Merrill Lynch (NYSE: MER  ) Nanotech Index (AMEX: NNZ  ) member Flamel Technologies (Nasdaq: FLML  ) has declined more than 50% since hitting a $43.60 all-time high in September. The stock, down 11% today on no discernible news, is not matching the 20% increase, since May, of its index peers.

Although the recent stock flameout might be an indication of trouble, a closer look reveals a lot to like.

The company has two product lines. Medusa uses nanoparticle technology to improve drug delivery of native protein drugs. Medusa avoids side effects through a more evenly controlled release of the drug. It can also maintain the duration of delivery for, in some cases, up to a month. The lead product, a long-acting (24-hour) human insulin being developed for Bristol-Myers Squibb (NYSE: BMY  ) , is in phase 2 trials.

The Micropump is Flamel's microparticle delivery platform for small-molecule drugs. Offering controlled release, it also provides extended delivery times. The lead product, acyclovir, for the treatment of acute genital herpes, is being developed for generic-drug company Biovail (NYSE: BVF  ) and has shown positive phase 3 results. Other partners include GlaxoSmithKline (NYSE: GSK  ) -- also in phase 3 testing -- and Merck (NYSE: MRK  ) .

Flamel is cash-rich thanks to a secondary offering last October (when the stock was more than 50% higher). The two analysts following the company expect it to be profitable this year; one sees earnings of $1.36 a share next year!

This young French company, involved in high-technology drug delivery, has a strong patent position. There is too much uncertainty to expect the high 2005 earnings forecast to be met, but, if it is, the current stock price is a bargain. Today's price flameout provides a buying opportunity for a company with promising products, lots of cash, and the ability to make money.

Join other investors at the Fool's Nanotechnology discussion board.

Fool contributorW.D. Crottydoes not own stock in any of the companies mentioned.


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