Flamel in a Nutshell

Last year was a rough one for Flamel Technologies (Nasdaq: FLML), because its only marketed drug, Coreg CR, failed to live up to sales projections. On Monday, the company released its year-end 2007 results and gave an update on drugs in its pipeline.

Coreg CR marketing partner GlaxoSmithKline (NYSE: GSK) already released the sales numbers several weeks ago for the drug, which treats high blood pressure and heart failure. In the fourth quarter, sales were $67 million worldwide and led to around $2.3 million worth of royalties for Flamel. This compares to the roughly $2.1 million worth of royalties from Coreg CR that Flamel took in during the third quarter. Here is a breakdown of the $176 million in worldwide Coreg CR sales last year.

One bit of positive news to come out about Coreg CR recently is that Glaxo may file a marketing application this year for a new combination version of Coreg CR and a commonly used and genericized ACE inhibitor. I don't expect the added convenience of this combination drug to lead to huge sales growth for Coreg CR, but if the Food and Drug Administration approves this, it would provide some incremental sales growth, and thus royalties and manufacturing revenue, for Flamel.

As for the rest of its pipeline, Flamel announced that it now has 13 "relationships" with drugmakers that are at the very least exploring preclinical feasibility studies of its Medusa and Micropump technologies. Ten of these partnerships are early stage feasibility deals for its Medusa controlled-release technology platform, including Flamel's deals with Wyeth (NYSE: WYE) and Merck Serono, and four of its partners are among the top-10 grossing pharmaceutical companies in the world.

While all these "relationships" are nice, until we learn the tangible terms of the deals and get a better idea of what compounds Flamel is working on, it's near impossible to ascribe much value to them. From a conservative investor's standpoint, it's probably much better to value Flamel today based on what the public knows it has: its in-house anti-hepatitis C compound, a diabetes compound, and Coreg CR.