Well, this is a bitter pill for Flamel (NASDAQ:FLML) investors to swallow. A study released last week showed that the biotech's technology allowing once-a-day dosing of GlaxoSmithKline's (NYSE:GSK) Coreg CR is no better at encouraging compliance than the twice-a-day regimen patients followed with the original version of Coreg.

The market walloped the stock once again, cutting its value by nearly one-fourth last week. Flamel's stock is down 75% from its 52-week high.

Flamel investors had hoped that a commercial success from the application of its drug delivery technology to Glaxo's blockbuster beta-blocker Coreg would light a fire with other drug companies to sign on the dotted line. Sanofi-Aventis (NYSE:SNY), for example, had captured about 30% of the market for its extended-release version for Ambien. In the past, Flamel has had deals with Biovail (NYSE:BVF) and Bristol-Myers Squibb (NYSE:BMY), but the company's been glacially slow to seal new agreements.

Adding to the pessimism, Glaxo ran into problems with another of its drugs, Avandia, and turned its attention away from Coreg CR. It then reported that conversions to the new formulation weren't what it hoped, though it said it would be giving Coreg CR renewed focus in the weeks ahead. With generic versions of the original Coreg coming to market next month, Glaxo's window of opportunity to get patients onto its new CR program is quickly closing.

The market seems to think that window has slammed shut, but this Fool believes the news merely sparked an overreaction. As fellow Foolish commentator Brian Lawler noted, while Flamel is under fire, there's an even more important study under way to ascertain whether Coreg CR is superior to AstraZeneca's (NYSE:AZN) Zestril.

The current study does crimp Flamel's hoped-for revenue streams from Coreg CR. Right now, the drug is the only approved product using Flamel's technology, and thus the only one providing royalty revenue. Flamel's management has said it's in discussions with as many as four new partners to license its technology. Should any one of them come through, new revenue spigots could open.

Flamel has always been a risky investment, and that hasn't changed. Although the market took the stock to the woodshed the other day, I'm still hesitant to invest here, until management proves it can get major deals signed. Despite its tempting looks, and the chance that I might miss the bottom by waiting, I'll increase my margin of safety by making sure that pharmaceuticals do have an interest in what Flamel is selling.

Get a dosage of related Foolish articles here:

Flamel is a recommendation of Motley Fool Hidden Gems. While risky biotechs should comprise only a small portion of your portfolio, a 30-day free trial subscription is a no-risk way of seeing all the recommendations beating the market by 38 percentage points.

Fool contributor Rich Duprey does not have a financial position in any of the stocks mentioned in this article. You can see his holdings here. GlaxoSmithKline is an Income Investor recommendation. The Motley Fool has a disclosure policy.