Nice: Flamel's Drug Approval

After the company was on Santa's naughty list last year, investors in drug delivery firm Flamel Technologies (Nasdaq: FLML  ) don't need to be reminded how nice 2006 has been to them: Shares are up more than 70% this year.

Last year was a tumultuous one because the firm's founder and CEO, Gerard Soula, was ousted in a shareholder revolt. Flamel also had to deal with the end of two of its partnerships and didn't sign new deals to make up for these losses.

With so much pessimism and internal hullabaloo, there weren't many investors willing to stick with Flamel, but those who did have been rewarded nicely. Despite not signing any new partners to drug development deals or visibly advancing its in-house products through the clinic, Flamel did have one big success this year when the Food and Drug Administration approved its improved formulation of GlaxoSmithKline's (NYSE: GSK  ) Coreg.

The approval of the controlled-release version of Glaxo's heart disease treatment came in October and was the early Christmas present that Flamel shareholders have been wanting for years. Because Flamel co-developed the improved formulation, it stands to gain millions in dollars in royalties when Coreg CR begins being sold next year. Considering that more than $1 billion of Coreg was sold in 2005 and sales have been up 40% year to date, there's also lots of sales growth left in this beta-blocker.

Just by virtue of nothing bad having happened to it, Flamel goes on the nice list for 2006. Whether Flamel's management is on shareholders' naughty or nice list next year will depend on whether there are any new drug development deals like the ones investors have been led on about for years. While the Coreg CR approval will be a boon to Flamel's top line, these new deals are needed to prove the long-term sustainability of Flamel's operations and technology.

There's a whole world of naughty and nice out there!Take a lookat the rest of the bunch.

Flamel is a Motley Fool Hidden Gems recommendation. If you're looking to add promising small-cap companies to your portfolio, Hidden Gems has recommended many a market beater. GlaxoSmithKline is an Income Investor recommendation.

Fool contributor Brian Lawler does not own shares of any company mentioned in this article. The Fool has adisclosure policy.


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