What a difference three months make. Last quarter, investors were disappointed with biotechnology and nanotechnology company -- and Motley Fool Hidden Gems recommendation -- Flamel Technologies (NASDAQ:FLML) for missing analyst earning estimates. The stock fell 6%.

Investors really turned a cold shoulder and sent the stock down 25% (ouch) when Bristol-Myers Squibb (NYSE:BMY) announced it was pulling out of a partnership to develop Basulin, one of Flamel's lead products -- and one that Novo Nordisk A/S (NYSE:NVO) had waived.

The stock has fallen 45% over the last 52 weeks. That's about as unloved as you can get for a company that is cash-rich, has an interesting product pipeline, and has partners such as Merck (NYSE:MRK).

Then there is yesterday's news that the company earned $2.8 million in the third quarter. Investors liked that and sent the stock up 8%.

These profits would be great news if they were from product sales (although cash from any source is welcome). Instead, a milestone payment for the start of phase 3 trials for a reformulation of a major existing product from partner GlaxoSmithKline (NYSE:GSK) is behind the profit.

With generic-drug company Biovail's (NYSE:BVF) long-acting Genvir micropump formulation for genital herpes also in phase 3 testing, Flamel, a partner, does have prospects for product sales. Still, the five analysts who cover the company (up from three a quarter ago) are split on whether the company can be profitable in 2005. Their mean estimate is for a $0.01-per-share profit.

Flamel, part of the Merrill Lynch (NYSE:MER) Nanotech Index, offers exposure to the drug world of the future without taking on many of the drug development risks. The company's premier micropump technology is aimed at long-acting versions of existing drugs. One success in the two phase 3 trials should usher in many other candidates.

The company's Medusa nanoparticle technology, which still needs a partner, improves the delivery of native protein drugs through a more evenly controlled release of the drug. With its potential to avoid side effects, there are plenty of prescription takers who hope the technology is a success.

Many Motley Fool Hidden Gems recommendations face a bumpy road. They are small and have little analyst coverage. Flamel's stock has certainly taken its share of bumps, but with two drugs in phase 3 trials, the company is worth watching.

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The Motley Fool is investors talking to investors. Fool contributor W.D. Crotty does not own stock in any of the companies mentioned.