UNITED STATES
SECURITIES AND EXCHANGE
COMMISSION
Washington, D.C.
20549
FORM 6-K
Report of Foreign
Private Issuer
Pursuant to Rule 13a-16 or 15d-16
of the Securities Exchange Act of 1934
For
the month of August 2014
Commission File Number
000-28508
Flamel Technologies
S.A.
(Translation of registrant's
name into English)
Parc Club du Moulin
à Vent
33 avenue du Dr.
Georges Levy
69693 Vénissieux
Cedex France
(Address of principal
executive offices)
Indicate by check mark whether the registrant
files or will file annual reports under cover of Form 20-F or Form 40-F.
Indicate by check mark whether registrant
by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to
Rule 12g3-2(b) under the Securities Exchange Act of 1934.
If "Yes"
is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82-____________
Index
FLAMEL TECHNOLOGIES
S.A.
FLAMEL TECHNOLOGIES
S.A.
Condensed Consolidated
Statement of Operations
(Unaudited)
(Amounts
in thousands of dollars, except per share data)
|
|
Three months ended June 30,
|
|
|
|
2013
|
|
|
2014
|
|
Revenue:
|
|
|
|
|
|
|
|
|
License and research revenue
|
|
$
|
1,650
|
|
|
$
|
2,270
|
|
Product sales and services
|
|
|
2,195
|
|
|
|
4,128
|
|
Other revenues
|
|
|
1,696
|
|
|
|
1,684
|
|
Total revenue
|
|
|
5,541
|
|
|
|
8,082
|
|
Costs and expenses:
|
|
|
|
|
|
|
|
|
Cost of goods and services sold
|
|
|
(1,283
|
)
|
|
|
(1,636
|
)
|
Research and development
|
|
|
(7,304
|
)
|
|
|
(6,742
|
)
|
Selling, general and administrative
|
|
|
(2,706
|
)
|
|
|
(4,295
|
)
|
Fair value remeasurement of acquisition liabilities, incl. related parties
|
|
|
(28,623
|
)
|
|
|
(12,607
|
)
|
Amortisation of intangible R&D assets
|
|
|
-
|
|
|
|
(2,938
|
)
|
Total
|
|
|
(39,916
|
)
|
|
|
(28,218
|
)
|
|
|
|
|
|
|
|
|
|
Profit (loss) from operations
|
|
|
(34,375
|
)
|
|
|
(20,136
|
)
|
|
|
|
|
|
|
|
|
|
Interest income net
|
|
|
(640
|
)
|
|
|
94
|
|
Interest expense on debt related to the royalty agreement with related parties.
|
|
|
(2,015
|
)
|
|
|
(1,079
|
)
|
Foreign exchange gain (loss)
|
|
|
(33
|
)
|
|
|
292
|
|
Other income (loss)
|
|
|
501
|
|
|
|
29
|
|
Income (loss) before income taxes
|
|
|
(36,562
|
)
|
|
|
(20,800
|
)
|
Income tax benefit (expense)
|
|
|
3,708
|
|
|
|
(273
|
)
|
Net income (loss)
|
|
$
|
(32,854
|
)
|
|
$
|
(21,073
|
)
|
|
|
|
|
|
|
|
|
|
Earnings (loss) per share
|
|
|
|
|
|
|
|
|
Basic earnings (loss) per ordinary share
|
|
$
|
(1.29
|
)
|
|
$
|
(0.55
|
)
|
Diluted earnings (loss) per share
|
|
$
|
(1.29
|
)
|
|
$
|
(0.55
|
)
|
|
|
|
|
|
|
|
|
|
Weighted average number of shares outstanding (in thousands) :
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
25,421
|
|
|
|
38,438
|
|
Diluted
|
|
|
25,421
|
|
|
|
38,438
|
|
See
notes to condensed consolidated financial statements
FLAMEL TECHNOLOGIES
S.A.
Condensed Consolidated
Statement of Operations
(Unaudited)
(Amounts
in thousands of dollars, except per share data)
|
|
Six months ended June 30,
|
|
|
|
2013
|
|
|
2014
|
|
Revenue:
|
|
|
|
|
|
|
|
|
License and research revenue
|
|
$
|
2,923
|
|
|
$
|
3,703
|
|
Product sales and services
|
|
|
4,302
|
|
|
|
10,068
|
|
Other revenues
|
|
|
3,456
|
|
|
|
3,485
|
|
Total revenue
|
|
|
10,681
|
|
|
|
17,256
|
|
Costs and expenses:
|
|
|
|
|
|
|
|
|
Cost of goods and services sold
|
|
|
(2,278
|
)
|
|
|
(3,588
|
)
|
Research and development
|
|
|
(15,833
|
)
|
|
|
(13,836
|
)
|
Selling, general and administrative
|
|
|
(5,197
|
)
|
|
|
(7,850
|
)
|
Fair value remeasurement of acquisition liabilities, incl. related parties
|
|
|
(31,599
|
)
|
|
|
(27,233
|
)
|
Acquisition note expenses, incl. related parties
|
|
|
-
|
|
|
|
(3,013
|
)
|
Amortisation of intangible R&D assets
|
|
|
-
|
|
|
|
(5,875
|
)
|
Total
|
|
|
(54,907
|
)
|
|
|
(61,395
|
)
|
|
|
|
|
|
|
|
|
|
Profit (loss) from operations
|
|
|
(44,226
|
)
|
|
|
(44,139
|
)
|
|
|
|
|
|
|
|
|
|
Interest income net
|
|
|
(1,069
|
)
|
|
|
(5,414
|
)
|
Interest expense on debt related to the royalty agreement with related parties
|
|
|
(2,015
|
)
|
|
|
(1,235
|
)
|
Foreign exchange gain (loss)
|
|
|
(9
|
)
|
|
|
471
|
|
Other income (loss)
|
|
|
466
|
|
|
|
82
|
|
Income (loss) before income taxes
|
|
|
(46,853
|
)
|
|
|
(50,235
|
)
|
Income tax benefit (expense)
|
|
|
5,170
|
|
|
|
2,524
|
|
Net income (loss)
|
|
$
|
(41,683
|
)
|
|
$
|
(47,711
|
)
|
|
|
|
|
|
|
|
|
|
Earnings (loss) per share
|
|
|
|
|
|
|
|
|
Basic earnings (loss) per ordinary share
|
|
$
|
(1.64
|
)
|
|
$
|
(1.43
|
)
|
Diluted earnings (loss) per share
|
|
$
|
(1.64
|
)
|
|
$
|
(1.43
|
)
|
|
|
|
|
|
|
|
|
|
Weighted average number of shares outstanding (in thousands) :
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
25,418
|
|
|
|
33,403
|
|
Diluted
|
|
|
25,418
|
|
|
|
33,403
|
|
See
notes to condensed consolidated financial statements
Condensed Consolidated
Statement of Comprehensive Income
(Unaudited)
(Amounts in thousands
of dollars)
|
|
Six months ended June 30,
|
|
|
|
2013
|
|
|
2014
|
|
|
|
|
|
|
|
|
Net Income (loss)
|
|
$
|
(41,683
|
)
|
|
$
|
(47,711
|
)
|
Other comprehensive income (loss):
|
|
|
|
|
|
|
|
|
Net foreign currency translation gain (loss)
|
|
|
(141
|
)
|
|
|
(2,025
|
)
|
|
|
|
|
|
|
|
|
|
Other comprehensive income (loss), net of tax
|
|
|
(141
|
)
|
|
|
(2,025
|
)
|
Comprehensive Income (loss)
|
|
$
|
(41,824
|
)
|
|
$
|
(49,736
|
)
|
Condensed Consolidated
Balance Sheet
(Unaudited)
(Amounts in thousands
of dollars, except per share data)
|
|
December 31,
2013
|
|
|
June 30,
2014
|
|
ASSETS
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
6,636
|
|
|
$
|
54,104
|
|
Marketable securities
|
|
|
401
|
|
|
|
23,753
|
|
Accounts receivable (net of allowance of $144 and $145
at December 31, 2013, and June 30, 2014 respectively)
|
|
|
6,204
|
|
|
|
3,637
|
|
Inventory
|
|
|
3,762
|
|
|
|
5,564
|
|
Research and development tax credit receivable short
term
|
|
|
14,139
|
|
|
|
15,232
|
|
Prepaid expenses and other current
assets
|
|
|
2,481
|
|
|
|
2,831
|
|
Total current assets
|
|
|
33,623
|
|
|
|
105,121
|
|
|
|
|
|
|
|
|
|
|
Goodwill, net
|
|
|
18,491
|
|
|
|
18,491
|
|
Property and equipment, net
|
|
|
17,435
|
|
|
|
16,605
|
|
Intangible assets
|
|
|
40,139
|
|
|
|
34,264
|
|
Other assets:
|
|
|
|
|
|
|
|
|
Research and development tax credit receivable long term
|
|
|
6,410
|
|
|
|
-
|
|
Other long-term assets
|
|
|
154
|
|
|
|
150
|
|
Total assets
|
|
$
|
116,252
|
|
|
$
|
174,631
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
Current portion of long-term debt, incl to related parties
|
|
|
19,194
|
|
|
|
18,055
|
|
Current portion of capital lease obligations
|
|
|
85
|
|
|
|
69
|
|
Accounts payable.
|
|
|
5,099
|
|
|
|
6,167
|
|
Current portion of deferred revenue
|
|
|
1,264
|
|
|
|
954
|
|
Advances from customers
|
|
|
116
|
|
|
|
44
|
|
Accrued expenses
|
|
|
6,527
|
|
|
|
5,345
|
|
Other current liabilities
|
|
|
8,310
|
|
|
|
7,207
|
|
Total current liabilities
|
|
|
40,595
|
|
|
|
37,841
|
|
|
|
|
|
|
|
|
|
|
Long-term debt, less current portion, incl. to related parties
|
|
|
66,320
|
|
|
|
69,401
|
|
|
|
|
|
|
|
|
|
|
Capital lease obligations, less current portion
|
|
|
103
|
|
|
|
70
|
|
Deferred tax liabilities
|
|
|
2,806
|
|
|
|
-
|
|
Other long-term liabilities
|
|
|
15,940
|
|
|
|
9,456
|
|
Total long-term liabilities
|
|
|
85,169
|
|
|
|
78,927
|
|
|
|
|
|
|
|
|
|
|
Shareholders' equity:
|
|
|
|
|
|
|
|
|
Ordinary shares: 25,612,550 issued and outstanding at December 31, 2013 and
38,581,300 at June 30, 2014 (shares authorised 46,267.940) at nominal value of 0.122 euro
|
|
|
3,746
|
|
|
|
5,933
|
|
Additional paid-in capital
|
|
|
211,473
|
|
|
|
326,397
|
|
Accumulated deficit
|
|
|
(235,546
|
)
|
|
|
(283,257
|
)
|
Accumulated other comprehensive income (loss)
|
|
|
10,815
|
|
|
|
8,790
|
|
Total shareholders' equity
|
|
|
(9,512
|
)
|
|
|
57,863
|
|
Total liabilities and shareholders' equity
|
|
$
|
116,252
|
|
|
$
|
174,631
|
|
FLAMEL TECHNOLOGIES
S.A.
Condensed Consolidated
Statement of Cash Flows
(Unaudited)
|
|
Six months ended
June 30,
|
|
|
|
2013
|
|
|
2014
|
|
|
|
|
|
|
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
(41,683
|
)
|
|
$
|
(47,711
|
)
|
Depreciation of property and equipment and intangible assets
|
|
|
1,584
|
|
|
|
7,213
|
|
Loss (gain) on disposal of property, equipment and inventory
|
|
|
85
|
|
|
|
3
|
|
Grants recognized in other income and income from operations
|
|
|
(334
|
)
|
|
|
(337
|
)
|
Remeasurement of acquisition liabilities including related parties
|
|
|
33,614
|
|
|
|
30,246
|
|
Interest expenses on debt related to the royalty agreement incl. related parties
|
|
|
-
|
|
|
|
1,179
|
|
Calculated Interest on amortized method
|
|
|
761
|
|
|
|
-
|
|
Stock compensation expense
|
|
|
961
|
|
|
|
1,107
|
|
Income tax
|
|
|
(5,229
|
)
|
|
|
(2,807
|
)
|
Increase (decrease) in cash from:
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
381
|
|
|
|
2,520
|
|
Inventory
|
|
|
(351
|
)
|
|
|
(1,816
|
)
|
Prepaid expenses and other current assets
|
|
|
513
|
|
|
|
(750
|
)
|
Research and development tax credit receivable
|
|
|
(2,636
|
)
|
|
|
5,132
|
|
Accounts payable
|
|
|
(347
|
)
|
|
|
210
|
|
Deferred revenue
|
|
|
(641
|
)
|
|
|
(397
|
)
|
Accrued expenses
|
|
|
(420
|
)
|
|
|
(1,847
|
)
|
Other current liabilities
|
|
|
175
|
|
|
|
4
|
|
Other long-term assets and liabilities
|
|
|
105
|
|
|
|
248
|
|
Net cash provided by (used in) operating activities
|
|
|
(13,462
|
)
|
|
|
(7,803
|
)
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
Purchases of property and equipment
|
|
|
(515
|
)
|
|
|
(715
|
)
|
Proceeds from disposal of property and equipment
|
|
|
7
|
|
|
|
3
|
|
Purchase of marketable securities
|
|
|
-
|
|
|
|
(27,752
|
)
|
Proceeds from sales of marketable securities
|
|
|
5,018
|
|
|
|
4,334
|
|
Net cash provided by (used in) investing activities
|
|
|
4,510
|
|
|
|
(24,130
|
)
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
Proceeds from loan or conditional grants
|
|
|
14,408
|
|
|
|
-
|
|
Reimbursment of loan
|
|
|
(23
|
)
|
|
|
(34,424
|
)
|
Reimbursment of conditional grants
|
|
|
|
|
|
|
(151
|
)
|
Earnout payments for acquisition including related parties
|
|
|
(75
|
)
|
|
|
(611
|
)
|
Principal payments on capital lease obligations
|
|
|
(38
|
)
|
|
|
(47
|
)
|
Cash proceeds from issuance of ordinary shares and warrants
|
|
|
297
|
|
|
|
116,152
|
|
Net cash provided by (used in) financing activities
|
|
|
14,569
|
|
|
|
80,919
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash and cash equivalents
|
|
|
(23
|
)
|
|
|
(1,518
|
)
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents
|
|
|
5,594
|
|
|
|
47,468
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, beginning of period
|
|
|
2,742
|
|
|
|
6,636
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, end of period
|
|
$
|
8,336
|
|
|
$
|
54,104
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosures of cash flow information:
|
|
|
|
|
|
|
|
|
Income tax paid
|
|
|
40
|
|
|
|
281
|
|
Interest paid
|
|
|
331
|
|
|
|
5,358
|
|
FLAMEL TECHNOLOGIES
S.A.
Consolidated
Statement of Shareholders’ Equity
(Unaudited)
(Amounts
in thousands of dollars)
|
|
Ordinary Shares
|
|
|
Additional
Paid-in
|
|
|
Accumulated
|
|
|
Accumulated
Other
Comprehen-sive
Income
|
|
|
Shareholders'
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Deficit
|
|
|
(Loss)
|
|
|
Equity
|
|
Balance at
January 1, 2014
|
|
|
25,612,550
|
|
|
|
3,746
|
|
|
|
211,473
|
|
|
|
(235,546
|
)
|
|
|
10,815
|
|
|
|
(9,512
|
)
|
Subscription of warrants
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
Issuance of ordinary shares on exercise of warrants
|
|
|
568,750
|
|
|
|
88
|
|
|
|
3,300
|
|
|
|
|
|
|
|
|
|
|
|
3,388
|
|
Issuance of ordinary shares on Capital raise
|
|
|
12,400,000
|
|
|
|
2,099
|
|
|
|
110,665
|
|
|
|
|
|
|
|
|
|
|
|
112,764
|
|
Stock-based compensation expense
|
|
|
|
|
|
|
|
|
|
|
959
|
|
|
|
|
|
|
|
|
|
|
|
959
|
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(47,711
|
)
|
|
|
|
|
|
|
(47,711
|
)
|
Other comprehensive income (loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,025
|
)
|
|
|
(2,025
|
)
|
Balance at June 30, 2014
|
|
|
38,581,300
|
|
|
|
5,933
|
|
|
|
326,397
|
|
|
|
(283,257
|
)
|
|
|
8,790
|
|
|
|
57,863
|
|
1.
SUMMARY OF SIGNIFICANT accounting policies
In the opinion of
the management of Flamel Technologies S.A. (the “Company”), the accompanying unaudited, condensed, consolidated financial
statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial
statements. Accordingly, these Financial Statements do not include all of the information and footnotes required for complete
annual financial statements, since certain footnotes and other financial information required by generally accepted accounting
principles in the United States (or US GAAP) can be condensed or omitted for interim reporting requirements. In the opinion of
management, all adjustments (consisting of only normal recurring accruals) considered necessary for a fair presentation of our
financial position and operating results have been included.
The preparation of
consolidated financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated
financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ
from those estimates.
Operating results
for the six months ended June 30, 2014 are not necessarily indicative of the results that may be expected for the full year ending
December 31, 2014. These condensed consolidated interim financial statements should be read in conjunction with the Company's
audited annual financial statements.
The reporting currency
of the Company and its wholly-owned subsidiaries is the U.S. dollar as permitted by the SEC for a foreign private issuer (S-X
Rule 3-20(a)). All assets and liabilities in the balance sheets of the Company, whose functional currency is the Euro, except
those of the U.S. subsidiaries whose functional currency is the U.S. dollar, are translated into U.S. dollar equivalents at exchange
rates as follows: (1) asset and liability accounts at period-end rates, (2) income statement accounts at weighted average exchange
rates for the period, and (3) shareholders' equity accounts at historical rates. Corresponding translation gains or losses are
recorded in shareholders' equity as Currency Translation Adjustments.
Other
comprehensive income includes solely currency translation adjustments, thus
no reclassifications out of accumulated other
comprehensive income to the statements of operations are recognized.
2. REVENUES
2.1 License and research
revenue
The Company recognized
license and research revenues of $3,703,000 for the first six months of 2014 compared to $2,923,000 for the six month period ended
June 30, 2013. Total research and development revenues amounted to $1,679,000 compared to $1,502,000 for the six month period
ended June 30, 2013 and licensing fees were recognized for a total of $2,024,000 for the first six months of 2014 compared to
$1,421,000 for the six month period ended June 30, 2013.
The license and research
revenues amounting to $3,703,000 relate to agreements with undisclosed partners.
2.2 Product sales
and services.
The Company recognized
product sales of $10,068,000 for the first six months of 2014 compared to $4,302,000 for the six month period of 2013.
Bloxiverz®,
the first FDA-approved version of neostigmine sulphate; was launched in July of 2013. In the six month period ended June 30, 2014,
the company recognised net product sales of
$5,718,000
from sales
of Bloxiverz®, based on net product sales of wholesalers to their customers. Net product sales of wholesalers to their customers
are determined using sales data from an independent, wholesaler inventory tracking service and
are calculated by deducting
estimates for returns for wholesalers’ customers, chargebacks, payment discounts and other sales or discounts offered
from the applicable gross sales value. Gross product sales amounted to
$7,137,000
.
A total of $1,350,000
of net revenue on shipments to wholesalers has been deferred as of June 30, 2014.
A total of $3,625,000
was recognised in connection with the supply agreement for the manufacture of Coreg CR microparticles with GSK for the six month
period ended June 30, 2014 compared to $4,302,000 for the six month period ended June 30, 2013.
2.3 Other revenues.
The Company recognized
other revenues of $3,485,000 for the six month period ended June 30, 2014 compared to $3,456,000 for the six month period ended
June 30, 2013, which includes royalties from the License Agreement with GSK with respect to Coreg CR.
3. RESEARCH TAX
CREDIT
The French government
provides tax credits to companies for spending on innovative research and development. The research tax credit is considered as
a grant and is deducted from operational expenses.
For the six month
period ended June 30, 2014, the credit amounted to $2,745,000 ($1,307,000 for the three-month period ended June 30, 2014) compared
to $2,508,000 for the six month period ended June 30, 2013
($1,218,000
for the three-month period ended June 30, 2013)
.
4. SHAREHOLDERS'
EQUITY
During the six month
period ended June 30, 2014, the Company issued 12,400,000 shares as a result of an underwritten public offering in March 2014.
The offering price to the public was $9.75 per American Depositary Share, each representing one ordinary share (“ADS”),
and included payment of a commission of $0.585 per ADS. Total net proceeds amounted to $113,646,000. Additional fees related to
the capital raise amounted to $882,000 and decreased the net proceeds to $112,764,000.
A further 568,750
shares were issued during the six month period ended June 30, 2014 as a result of the exercise of stock options and
warrants.
The total amount of
shares outstanding as of June 30, 2014 amounted to 38,581,300.
5. STOCK COMPENSATION
EXPENSE
During the six month
period ending June 30, 2014, no stock options, free share awards or warrants were granted by the Company
.
Net income (loss) before
and after stock-based compensation is as follows:
|
|
Three months ended
June 30,
|
|
|
Six months ended
June 30,
|
|
(in thousands except per share data)
|
|
2013
|
|
|
2014
|
|
|
2013
|
|
|
2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
(32,854
|
)
|
|
$
|
(21,073
|
)
|
|
$
|
(41,683
|
)
|
|
$
|
(47,711
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
(1.29
|
)
|
|
$
|
(0.55
|
)
|
|
$
|
(1.64
|
)
|
|
$
|
(1.43
|
)
|
Diluted
|
|
$
|
(1.29
|
)
|
|
$
|
(0.55
|
)
|
|
$
|
(1.64
|
)
|
|
$
|
(1.43
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of shares used for computing (weighted average)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
25,421
|
|
|
|
38,438
|
|
|
|
25,418
|
|
|
|
33,403
|
|
Diluted
|
|
|
25,421
|
|
|
|
38,438
|
|
|
|
25,418
|
|
|
|
33,403
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation (ASC 718)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of products and services sold
|
|
|
5
|
|
|
|
10
|
|
|
|
10
|
|
|
|
20
|
|
Research and development
|
|
|
180
|
|
|
|
136
|
|
|
|
372
|
|
|
|
394
|
|
Selling, general and administrative
|
|
|
280
|
|
|
|
156
|
|
|
|
579
|
|
|
|
568
|
|
Total
|
|
|
465
|
|
|
|
301
|
|
|
|
961
|
|
|
|
982
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) before stock-based compensation
|
|
|
(32,389
|
)
|
|
|
(20,772
|
)
|
|
|
(40,722
|
)
|
|
|
(46,729
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) before stock-based compensation per share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
(1.27
|
)
|
|
$
|
(0.54
|
)
|
|
$
|
(1.60
|
)
|
|
$
|
(1.40
|
)
|
Diluted
|
|
$
|
(1.27
|
)
|
|
$
|
(0.54
|
)
|
|
$
|
(1.60
|
)
|
|
$
|
(1.40
|
)
|
6. INTANGIBLE
ASSETS
|
|
December 31,
|
|
|
June 30,
|
|
|
|
2013
|
|
|
2014
|
|
(In thousands of U.S. dollars)
|
|
Gross carrying
amount
|
|
|
Accumulated
amortization
|
|
|
Impairment
|
|
|
Intangible
assets, net
|
|
|
Gross carrying
amount
|
|
|
Accumulated
amortization
|
|
|
Impairment
|
|
|
Intangible
assets, net
|
|
In-progess R&D
|
|
|
12,061
|
|
|
|
-
|
|
|
|
(7,170
|
)
|
|
|
4,891
|
|
|
|
4,891
|
|
|
|
-
|
|
|
|
|
|
|
|
4,891
|
|
Intangible asset corresponding
to acquired IPR&D of Bloxiverz
|
|
|
35,248
|
|
|
|
|
|
|
|
|
|
|
|
35,248
|
|
|
|
35,248
|
|
|
|
(5,875
|
)
|
|
|
|
|
|
|
29,373
|
|
Total Intangible assets
|
|
$
|
47,309
|
|
|
$
|
-
|
|
|
$
|
(7,170
|
)
|
|
$
|
40,139
|
|
|
$
|
40,139
|
|
|
$
|
(5,875
|
)
|
|
$
|
-
|
|
|
$
|
34,264
|
|
Intangible
assets corresponding to acquired in process research and development of Bloxiverz® is being amortized straight-line over a
3 year period as of January 1, 2014.
7. INVENTORY
The components
of inventories were as follows:
(In thousands of U.S. dollars)
|
|
December
31, 2013
|
|
|
June
30, 2014
|
|
|
|
|
|
|
|
|
Raw materials
|
|
|
1,715
|
|
|
|
2,172
|
|
Finished goods
|
|
|
2,047
|
|
|
|
3,392
|
|
|
|
|
|
|
|
|
|
|
Inventories, net
|
|
|
3,762
|
|
|
|
5,564
|
|
Inventories
consist of raw materials and finished products, which are stated at cost determined under the first-in, first-out ("FIFO")
method. Raw materials used in the production of pre-clinical and clinical products are expensed as research and development costs
when consumed. The Company establishes reserves for inventory estimated to be obsolete, unmarketable or slow-moving on a case
by case basis.
8. LONG-TERM
DEBT
Long-term
debt comprises:
(In thousands of U.S. dollars)
|
|
December
31, 2013
|
|
|
June
30, 2014
|
|
|
|
|
|
|
|
|
Government loans for R&D projects (a)
|
|
|
4,586
|
|
|
|
4,392
|
|
Acquisition liability contingent consideration (b)
|
|
|
37,991
|
|
|
|
46,276
|
|
Acquisition liability note (b)
|
|
|
10,405
|
|
|
|
-
|
|
Acquisition liability warrant consideration (b)
|
|
|
10,497
|
|
|
|
28,868
|
|
Deerfield Facility agreement (c)
|
|
|
12,492
|
|
|
|
-
|
|
Deerfield Royalty agreement (c)
|
|
|
4,590
|
|
|
|
5,364
|
|
Broadfin Facility agreement (d)
|
|
|
2,767
|
|
|
|
-
|
|
Broadfin Royalty agreement (d)
|
|
|
2,187
|
|
|
|
2,556
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
85,515
|
|
|
|
87,456
|
|
Current portion
|
|
|
19,194
|
|
|
|
18,055
|
|
Long-term portion
|
|
|
66,321
|
|
|
|
69,400
|
|
(a) French
government agencies provide financing to French companies for research and development. At December 31, 2013 and June 30, 2014,
the Company had outstanding loans of $4,586,000 and $4, 392,000 respectively for various programs. These loans do not bear
interest and are repayable only in the event the research project is technically or commercially successful. Potential repayment
is scheduled to occur from 2014 through 2019.
(b) The Acquisition
liability relates to the acquisition by the Company on March 13, 2012, through its wholly owned subsidiary Flamel US Holdings,
Inc., or Flamel US, all of the membership interests of Éclat Pharmaceuticals, LLC. In exchange for all of the issued and
outstanding membership interests of Éclat Pharmaceuticals, Flamel US provided consideration consisting of:
|
·
|
a
$12 million senior, secured six-year note guaranteed by the Company and its subsidiaries
and secured by the equity interests and assets of Éclat. The note was repaid on
March 24, 2014 in its entirety; The accelerated reimbursement of this note resulted in
operating expenses of $3.0 million
|
|
·
|
two
warrants to purchase a total of 3,300,000 ADSs; and
|
|
·
|
a
commitment to make earn out payments of 20% of any gross profit generated by certain
Éclat Pharmaceuticals launch products
|
As of
June, 2014, the fair value of the warrants was determined by using a Black-Scholes option pricing model with the following assumptions:
|
|
Three months ended
June 30, 2013
|
|
|
Three months ended
June 30, 2014
|
|
Share price
|
|
$
|
6.14
|
|
|
$
|
15
|
|
Risk-free interest rate
|
|
|
1.41
|
%
|
|
|
1.25
|
%
|
Dividend yield
|
|
|
-
|
|
|
|
-
|
|
Expected volatility
|
|
|
54
|
%
|
|
|
54.32
|
%
|
Expected term
|
|
|
4.8 years
|
|
|
|
3.8 years
|
|
Pursuant
to guidance of ASC 815-40-15-7(i), the Company determined that the Warrants issued in March 2012 as consideration for the acquisition
of Éclat could not be considered as being indexed to the Company’s own stock, on the basis that the exercise price
for the warrants is determined in U.S. dollars, although the functional currency of the Company is the Euro. The Company determined
that these warrants should be accounted as a debt instrument.
As of
June 30, 2014, the deferred consideration fair value was estimated by using a discounted cash flow model based on probability
adjusted annual gross profit of each of the Éclat Pharmaceuticals products. A discount rate of 20% has been used.
(c) On February
4, 2013 the Company concluded a $15 million debt financing transaction (the “Deerfield Facility”) with Deerfield Management
a current shareholder. The consideration received was as follows:
|
·
|
$12.4
million for a facility agreement of a nominal value of $15 million, including a premium
on reimbursement of $2.6 million. The indebtedness was repaid on March 24, 2014 in its
entirety; The accelerated reimbursement of this note resulted in interest expenses of
$2.5 million
|
|
·
|
$2.6
million for a Royalty Agreement whereby, the Company’s wholly owned subsidiary
Éclat subject to required regulatory approvals and launch of product, is to pay
a 1.75% royalty on the net sales of certain products sold by Éclat and any of
its affiliates until December 31, 2024.
|
The fair
value of the royalty was estimated using a probability-weighted discounted cash flow model based on probability adjusted projected
annual net sales of each of the products which may be approved and sold by Éclat Pharmaceuticals. This fair value measurement
is based on significant inputs not observable in the market and thus represents a level 3 measurement as defined in ASC 820. The
discount rate used is 20%.
(d) On December
3, 2013 the Company concluded with Broadfin Healthcare Master Fund, a current shareholder, a $15 million debt financing transaction
(the “Broadfin Facility”) divided in 3 tranche of $5 million each, Under the terms of the Facility, upon closing Broadfin
made an initial loan of $5.0 million. Consideration received was as follows:
|
·
|
$2.8
million for a facility agreement of a nominal value of $5.0 million. Loans under the
Broadfin Facility were scheduled to mature upon the earlier to occur of (i) January 31,
2017 and (ii) the repayment in full of all outstanding amounts under the Deerfield Facility,
but in no event prior to November 15, 2015. The indebtedness was repaid on March 24,
2014 in its entirety; the accelerated reimbursement of this note resulted in interest
expenses of $ 2.2 million.
|
|
·
|
$2.2
million for a royalty agreement whereby, the Company’s wholly owned subsidiary
Éclat subject to required regulatory approvals and launch of product, is to pay
a 0.834% royalty on the net sales of certain products sold by Éclat and any of
its affiliates until December 31, 2024.
|
The fair
value of the royalty was estimated using a probability-weighted discounted cash flow model based on probability adjusted projected
annual net sales of each of the products which may be approved and sold by Éclat Pharmaceuticals. This fair value measurement
is based on significant inputs not observable in the market and thus represents a level 3 measurement as defined in ASC 820. The
discount rate used is 20%.
Total
future payments on long-term debt for the next five years ending June 30 (assuming the underlying projects are commercially or
technically successful for governmental research loans) are as follows:
(In thousands of U.S. dollars)
|
|
June
30, 2014
|
|
|
|
|
|
2014
|
|
|
7,469
|
|
2015
|
|
|
24,737
|
|
2016
|
|
|
22,200
|
|
2017
|
|
|
8,807
|
|
2018
|
|
|
7,570
|
|
|
|
|
|
|
|
|
|
70,783
|
|
9.
RELATED
PARTY TRANSACTIONS
In March
2012, we acquired, through our wholly owned subsidiary Flamel US, all of the membership interests of Éclat from Éclat
Holdings, an affiliate of our largest shareholder Deerfield Capital L.P., for consideration primarily consisting of a $12 million
senior, secured six-year note that is guaranteed by us and our subsidiaries and secured by the equity interests and assets of
Éclat, two warrants to purchase a total of 3,300,000 ADSs of Flamel and commitments to make earn out payments of 20% of
any gross profit generated by certain Éclat launch products and 100% of the gross profit generated by our former product
Hycet®, which we sold in 2013, up to a maximum of $1 million. Upon closing of the acquisition, Mr. Anderson, the Chief
Executive Officer of Éclat, was appointed Chief Executive Officer of Flamel. Mr. Anderson retains a minority interest
in Éclat Holdings, renamed Breaking Stick, and does not have the ability to control this entity by virtue of his minority
interest. The senior secured note was repaid in full in March 2014 using the net proceeds from our public sale of ADSs.
On February
4, 2013, we entered into a the Deerfield Facility through Flamel US with Deerfield Private Design Fund II, L.P. and Deerfield
Private Design International II, L.P. (together, the “Deerfield Entities”) providing for debt financing of $15 million
by the Deerfield Entities (the “Loan”). The Loan was repaid in full in March 2014 using the net proceeds from our
public sale of ADSs.
The Deerfield
Facility was subject to certain limitations, and allowed us to use the funds for working capital, including continued investment
in our research and development projects. Interest accrued at 12.5% per annum to be paid quarterly in arrears, commencing on April
1, 2013, and on the first business day of each July, October, January and April thereafter. Pursuant to the Deerfield Facility,
we were required to pay the Deerfield Entities a fee of $112,500 for entering into the transaction and to reimburse the Deerfield
Entities for legal costs and expenses incurred in effecting the transaction.
In conjunction
with our entry in the Deerfield Facility, Éclat entered into a Royalty Agreement with Horizon Santé FLML, Sarl and
Deerfield Private Design Fund II, L.P., both affiliates of the Deerfield Entities (together, “Deerfield PDF/Horizon”).
The Royalty Agreement provides for Éclat to pay Deerfield PDF/Horizon 1.75% of the net sales price of the products sold
by us and any of our affiliates until December 31, 2024, with royalty payments accruing daily and paid in arrears for each
calendar quarter during the term of the Royalty Agreement. The Royalty Agreement requires Éclat to take all commercially
reasonable efforts to obtain the necessary regulatory approvals to sell the products in the United States and to market the Products
after receiving such approvals.
We also
entered into a Security Agreement dated February 4, 2013 with Deerfield PDF/Horizon, whereby Deerfield PDF/Horizon was granted
a security interest in the intellectual property and regulatory rights related to the products to secure the obligations of Éclat
and Flamel US, including the full and prompt payment of royalties to Deerfield PDF/Horizon under the Royalty Agreement.
We also
entered into two pledge agreements on certain receivables and equipment we own. These agreements were required to be recorded
under French law and on request of Deerfield. No request has been made and the receivable pledge was released in full in June
2014.
As of
December 3, 2013, we and certain of our U.S. subsidiaries entered into a Facility Agreement (the “Broadfin Facility”)
with Broadfin Healthcare Master Fund, Ltd. (“Broadfin”) providing for loans by Broadfin in an aggregate amount not
to exceed $15.0 million. The loans under the Broadfin Facility were secured by a first priority security interest in intellectual
property associated with our Medusa technology and a junior lien on substantially all of the assets of the borrowers, which were
previously pledged in connection with the Deerfield Facility, the Royalty Agreement and the notes issued in connection with the
Éclat acquisition. In addition, we have agreed to grant a junior lien on certain equipment located in France, if such previously
pledged equipment under the Deerfield Facility and/or the Éclat note is recorded.
Under
the terms of the Broadfin Facility, upon closing Broadfin made an initial loan of $5.0 million and we had the ability to request,
at any time prior to August 15, 2014, up to two additional loans in the amount of $5.0 million each, with funding subject to certain
specified conditions. Loans under the Broadfin Facility were scheduled to mature upon the earlier to occur of (i) January 31,
2017 and (ii) the repayment in full of all outstanding amounts under the Deerfield Facility, but in no event prior to November
15, 2015. We had the ability to prepay the outstanding loans under the Broadfin Facility at any time, without prepayment penalty
and the full $5.0 million outstanding was subsequently repaid using a portion of the net proceeds from our public sale of ADSs
in March 2014. Prior to repayment, interest accrued on the loan under the Broadfin Facility at a rate of 12.5% per annum, payable
quarterly in arrears, commencing on January 1, 2014.
In connection
with entering into the Broadfin Facility, we also entered into a Royalty Agreement with Broadfin, dated as of December 3, 2013
(the “Broadfin Royalty Agreement”). Pursuant to the Broadfin Royalty Agreement, we are required to pay a royalty of
0.834% on the net sales of certain products sold by Éclat Pharmaceuticals, LLC and any of its affiliates until December
31, 2024.
Concurrent
with entering into the Broadfin Facility, we also amended the terms of the Deerfield Facility and the agreement governing the
Éclat notes to, among other things, permit the indebtedness and liens under the Broadfin Facility and to grant a junior
lien to the respective lenders on the Medusa Technology.
10.
FAIR
VALUE OF FINANCIAL INSTRUMENTS
At December
31, 2013 and June 30, 2014, the carrying values of financial instruments such as cash and cash equivalents, trade receivables
and payables, other receivables and accrued liabilities and the current portion of long-term debt approximated their market values,
based on the short-term maturities of these instruments.
The company
calculates fair value for its marketable securities based on quoted market prices for identical assets and liabilities which represents
Level 1 of ASC 820-10 fair value hierarchy.
At December
31, 2013 and June 30, 2014 the fair value of long-term debt and long term receivables was comparable with their carrying values.
The following
table presents information about the Company securities based on quoted market prices for identical assets and liabilities for
June 30, 2014 and indicates the fair value hierarchy of the valuation technics utilized to determine such fair value.
|
|
|
|
|
|
|
|
|
|
|
|
June,30
2014
|
|
|
June,30
2013
|
|
(in thousands)
|
|
|
|
|
|
Fair Value
Measured and Recorded Using
|
|
Operational
|
|
|
Financial Gain
|
|
|
|
|
|
Operational
|
|
|
Financial Gain
|
|
|
|
|
|
|
|
Net Carrying
|
|
|
|
|
|
|
|
Gain (losses)
|
|
|
(losses)
|
|
|
|
|
|
Gain (losses)
|
|
|
(losses)
|
|
|
|
|
|
Net Carrying Value as of
|
|
Value as of
|
|
|
|
|
|
|
|
recognized in
|
|
|
recognized in
|
|
|
|
|
|
recognized in
|
|
|
recognized in
|
|
|
|
|
|
December 31,
2013
|
|
June 30, 2014
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
earnings
|
|
|
earnings
|
|
|
Total
|
|
|
earnings
|
|
|
earnings
|
|
Total
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalent
|
|
|
6,636
|
|
|
54,104
|
|
|
54,104
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
-
|
|
Marketable securities
|
|
|
401
|
|
|
23,753
|
|
|
23,753
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
-
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition liability contingent consideration (a)
|
|
|
37,991
|
|
|
46,270
|
|
|
-
|
|
|
-
|
|
|
46,270
|
|
|
(8,862
|
)
|
|
|
-
|
|
|
|
(8,862
|
)
|
|
|
(22,083
|
)
|
|
|
-
|
|
|
(22,083
|
)
|
Acquisition liability note (b)
|
|
|
10,405
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(3,013
|
)
|
|
|
|
|
|
|
(3,013
|
)
|
|
|
(4,090
|
)
|
|
|
|
|
|
(4,090
|
)
|
Acquisition liability warrant consideration (c)
|
|
|
10,497
|
|
|
28,868
|
|
|
-
|
|
|
-
|
|
|
28,868
|
|
|
(18,371
|
)
|
|
|
-
|
|
|
|
(18,371
|
)
|
|
|
(5,426
|
)
|
|
|
-
|
|
|
(5,426
|
)
|
Deerfield Royalty Agreement (d)
|
|
|
4,590
|
|
|
5,364
|
|
|
|
|
|
|
|
|
5,364
|
|
|
|
|
|
|
(836
|
)
|
|
|
(836
|
)
|
|
|
-
|
|
|
|
-
|
|
|
-
|
|
Broadfin Royalty Agreement (e)
|
|
|
2,187
|
|
|
2,556
|
|
|
|
|
|
|
|
|
2,556
|
|
|
|
|
|
|
(399
|
)
|
|
|
(399
|
)
|
|
|
-
|
|
|
|
-
|
|
|
-
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(30,246
|
)
|
|
|
(1,235
|
)
|
|
|
(31,481
|
)
|
|
|
(31,599
|
)
|
|
|
-
|
|
|
(31,599
|
)
|
The fair
value of the financial instruments in connection with the acquisition of Éclat (
see note 8 Long-Term Debt
) are estimated
as follows:
(a) Acquisition
liability contingent consideration: the fair value is estimated using a discounted cash flow model based on probability adjusted
projected annual gross profit of each of the products which formed the project portfolio at the time of acquisition of Éclat
Pharmaceuticals (
Note 8
Long Term Debt).
The fair
value of the contingent consideration will change over time in accordance with the changes in market conditions and thus business
plan projections as the relate to market size, market share, product pricing, competitive landscape, gross profit margins expected
for each of the products.
(b) Acquisition
liability Note: the Company uses a probability-weighted discounted cash flow model (
see note 8 Long Term Debt
). The note
was repaid on March 24, 2014.
(c) Acquisition
liability warrant consideration: the Company uses a Black-Scholes option pricing model. The fair value of the warrant consideration
will change over time depending on the volatility and share price at balance sheet date (
see note 8 Long Term Debt
).
(d) Royalty
Agreements: the fair value is estimated using a discounted cash flow model based on probability adjusted projected annual net
sales of each of the products which may be approved and sold by Éclat Pharmaceuticals (
Note 8
Long Term Debt). The
discount rate is 20%.
The following tables provide
a reconciliation of fair value for which the Company used Level 3 inputs:
|
|
Acquisition
|
|
|
|
Liabilities
|
|
Liability recorded upon acquisition
|
|
$
|
(50,927
|
)
|
Operational gain (loss) recognized in earnings for fiscal year 2012
|
|
$
|
18,993
|
|
Operational gain (loss) recognized in earnings for fiscal year 2013
|
|
$
|
(26,959
|
)
|
|
|
|
|
|
Net carrying value at January 1, 2014
|
|
$
|
(58,893
|
)
|
Operational gain (loss) recognized in earnings for six months to June 30, 2014
|
|
$
|
(30,246
|
)
|
Payment of interest on acquisition liability note
|
|
$
|
1,390
|
|
Reimbursment of acquisition liability note
|
|
$
|
12,000
|
|
Payment of deferred consideration
|
|
$
|
610
|
|
Net carrying value at June 30, 2014
|
|
$
|
(75,139
|
)
|
|
|
Deerfield
Royalty
|
|
|
Broadfin
Royalty
|
|
|
|
Agreement
|
|
|
Agreement
|
|
|
|
|
|
|
|
|
Liability recorded upon execution of Agreeement
|
|
$
|
(2,600
|
)
|
|
$
|
(2,187
|
)
|
Interest expense recognized in earnings for 2013
|
|
$
|
(1,990
|
)
|
|
|
|
|
Interest expense recognized in earnings for six months to June 30, 2014
|
|
$
|
(836
|
)
|
|
$
|
(399
|
)
|
Payment of royalty
|
|
$
|
62
|
|
|
$
|
30
|
|
Net carrying value at June 30, 2014
|
|
$
|
(5,364
|
)
|
|
$
|
(2,556
|
)
|
The acquisition
liabilities, consisting of the note, warrants and deferred consideration, and Royalty Agreements all of which are classified as
long-term debt, are measured at fair value and the income or expense may change significantly as assumptions regarding the valuations
and probability of successful development and approval of products in development vary.
Item
2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Forward-Looking
Statements
This report on Form
6-K contains forward-looking statements. We may make additional written or oral forward-looking statements from time to time in
filings with the Securities and Exchange Commission or otherwise. The words ‘believe,’ ‘expect,’ ‘anticipate,’
‘project,’ ‘will,’ ‘continue’ and similar expressions identify forward-looking statements,
which speak only as of the date the statement is made. Such forward-looking statements are within the meaning of that term in
Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Although we believe
that our expectations are based on reasonable assumptions within the bounds of our knowledge of our business and operations, our
business is subject to significant risks and there can be no assurance that actual results of our development and manufacturing
activities and our results of operations will not differ materially from our expectations.
Factors that could
cause actual results to differ from expectations include, among others:
|
·
|
we
currently depend on a small number of customers for the majority of our revenues related
to our drug delivery platforms and drug products (e.g. Coreg CR
®
microparticles
and Éclat products), and the loss of any one of these customers could reduce our
revenues significantly.
|
|
·
|
our
focus on (i) the development and licensing of versatile, proprietary drug delivery platforms,
(ii) the development of novel, high-value products based on our drug delivery platforms
and (iii) as a result of our acquisition of Éclat, the development, approval,
and commercialization of niche branded and generic pharmaceutical products in the U.S.,
rather than primarily on collaborative agreements with pharmaceutical and biotechnology
companies, may not be successful.
|
|
·
|
our
current revenues from our drug delivery business primarily depend on third party pharmaceutical
and biotechnology companies successfully developing products that incorporate our drug
delivery platforms.
|
|
·
|
we
must invest substantial sums in research and development in order to remain competitive,
and we may not fully recover these investments.
|
|
·
|
we
currently depend upon a single site to manufacture some of our drug products and our
drug delivery product, Coreg CR
®
microparticles, and any interruption
of operations could have a material adverse effect on our business.
|
|
·
|
we
depend upon a limited number of suppliers for certain raw materials used in our drug
delivery technologies and for the manufacture of certain drug products in development,
and any failure to deliver sufficient quantities of supplies of these raw materials or
product could interrupt our production process and could have a material adverse effect
on our business.
|
|
·
|
if
our competitors develop and market technologies or products that are more effective or
safer than ours, or obtain regulatory approval and market such technologies or products
before we do, our commercial opportunity will be diminished or eliminated.
|
|
·
|
we
may fail to realize the anticipated benefits expected from the acquisition of Éclat
and its portfolio of late-stage products pipeline products, and any new and complementary
businesses, products and technologies we may acquire in the future.
|
|
·
|
if
we cannot keep pace with the rapid technological change in our industry, we may lose
business, and our drug delivery platforms and products could become obsolete or noncompetitive.
|
|
·
|
if
we cannot adequately protect our drug delivery platforms and proprietary information,
we may be unable to sustain a competitive advantage.
|
|
·
|
even
if we and our partners obtain necessary regulatory approvals, our products and drug delivery
platforms, or our partners’ products (incorporating our platforms) may not gain
market acceptance.
|
|
·
|
our
collaborative arrangements may give rise to disputes over commercial terms, contract
interpretation and ownership of intellectual property and may adversely affect the commercial
success of the products developed under those partnerships.
|
|
·
|
third
parties may claim, that our drug delivery platforms, or the products in which they are
used, or our other products infringe on their rights and we may incur significant costs
resolving these claims or may not be able to resolve.
|
|
·
|
if
we or our third party collaborative partners are required to obtain licenses from third
parties, our revenues and royalties on any commercialized products could be reduced.
|
|
·
|
if
our third party collaborative partners face generic competition for their products, our
revenues and royalties from such products may be adversely affected.
|
|
·
|
healthcare
reform and restrictions on reimbursements may limit our financial returns.
|
|
·
|
fluctuations
in foreign currency exchange rates and the impact of the European sovereign debt crisis
may clause fluctuations in our financial results.
|
|
·
|
products
that incorporate our drug delivery platforms and our late-stage development products
acquired from Éclat and other products we may develop are subject to regulatory
approval. If we or our pharmaceutical and biotechnology company partners do not obtain
such approvals, or if such approvals are delayed, our revenues may be adversely affected.
|
|
·
|
commercial
products are subject to continuing regulation, and we on our own, and in conjunction
with our pharmaceutical and biotechnology companies partners, may be subject to adverse
consequences if we or they fail to comply with applicable regulations.
|
|
·
|
we
are subject to U.S. federal and state laws prohibiting “kickbacks” and false
claims that, if violated, could subject us to substantial penalties, and any challenges
to or investigation into our practices under these laws could cause adverse publicity
and be costly to respond to, causing harm to our business.
|
|
·
|
regulatory
reforms may adversely affect our ability to sell our products or technologies drug delivery
platforms profitably.
|
|
·
|
we
and companies to which we have licensed our drug delivery platforms and subcontractors
we engage for services related to our in the development of our products are subject
to extensive regulation by the FDA and other regulatory authorities. Their failure to
meet these regulatory requirements could adversely affect our business.
|
|
·
|
we
may face product liability claims related to participation in clinical trials or the
use or misuse of our products or third party products that incorporate our drug delivery
platforms.
|
|
·
|
if
we use hazardous biological and/or chemical materials in a manner that causes injury,
we may be liable for significant damages.
|
|
·
|
The
risk factors described under the heading « Risk Factors » in our
Annual Report on Form 20-F for the year ended December 31, 2013, as updated in any subsequent
report that we may file from time to time with the SEC.
|
Forward-looking statements
are subject to inherent risks and uncertainties, some of which cannot be predicted or quantified. Future events and actual results
could differ materially from those set forth in, contemplated by or underlying the forward-looking statements. We undertake no
obligation to update these forward-looking statements as a result of new information, future events or otherwise. You should not
place undue reliance on these forward looking statements.
RESULTS OF OPERATIONS
For the six months
period ended June 30, 2014, Flamel reported total revenues of $17.3 million compared to $10.7 million of revenues reported for
the first six months of 2013, which increase primarily due to initial recognition of sales of Bloxiverz®.
License and research
revenues for the six months ended June 30, 2014 were $3.7 million compared to $2.9 million for the first six months of 2013.
Product sales and
services, totaled $10.1 million for the six months ended June 30, 2014, compared to $4.3 million for the six months ended June
30, 2013, the with increase primarily resulting from initial sales of Bloxiverz®.
Other revenues were
$3.5 million for the six months ended June 30, 2014 compared to $3.5 million for the first six months of 2013. These revenues
are derived primarily from the royalty on sales of Coreg CR.
Operating expenses
increased to $61.4 million during the six months June 30, 2014 from $54.9 million for the six months June 30, 2013, and includes
a $27.2 million non-cash expense based on fair-value measurement of certain liabilities associated with the acquisition of
Éclat Pharmaceuticals as of June 30, 2014 compared with a $31.6 million for the six months June 30, 2013, amortization
of intangible assets associated with the development of Bloxiverz® for a total of $5.9 million and $3.0 million non-cash expense
associated with the accelerated reimbursement of the acquisition note.
Costs of goods and
services sold were $3.6 million in the six months ended June 30, 2014 compared to $2.3 million for the six months June 30, 2013.
The increase primarily relates to cost of sales of Bloxiverz®.
Research
and development expenditures were $13.8 million in the six months period ended June 30, 2014 compared to $15.8 million in the
six months period ended June 30, 2013. Research and development expenditures in the prior year period included $2.0 million associated
with an NDA filing fee and $0.5 million for resubmission fee for VAZCULEP
™
that
did not recur in the current year period.
Selling, general and
administrative expenses increased from $5.2 million in the six months June 30, 2013 to $7.9 million in the six months
ended June 30, 2014. This increase resulted from additional selling and marketing costs to support the launch of Bloxiverz®,
the cost of post-marketing studies requested by the FDA and increased legal costs.
Net loss for the six
months period ended June 30, 2014 was $47.7 million, compared to a net loss of $41.7 million in the six months June
30, 2013. Net loss per share (basic) for the six months ended June 30, 2014 was $(1.43), compared to a net loss per share in the
one year-ago period of $(1.64). Net loss and loss per share (basic and diluted) for the first six months of 2014 include impact
of non-cash expenses net of tax effect amounting to $(41.0) million and $(1.23), respectively, related to fair value remeasurements,
amortization of intangible assets and effects of accelerated reimbursement of certain debt instructions, compared with a $(31.3)
million and $(1.23) impact, respectively for the six months June 30, 2013.
LIQUIDITY AND CAPITAL
RESOURCES
We primarily depend
on cash flows from operations, together with the issuance of equity and debt securities from time to time, to finance our current
working capital needs and capital expenditures. On June 30, 2014, the Company had $78 million in cash, cash equivalents and marketable
securities, compared to $7 million on December 31, 2013. This increase was due to the $113 million of net proceeds received on
the sale of 12.4 million ADSs in March, 2014 and the subsequent reimbursement of outstanding debt and credit lines for a total
of $32 million. As of June 30, 2014 the Company has no debt outstanding on the $12 million note relative to the acquisition of
Éclat Pharmaceuticals LLC in March 2012, the $15 million Deerfield Facility and the $5 million Broadfin Facility. The remaining
proceeds from the capital increase will be used to continue the development of the Company’s product pipeline, including
possible clinical trials and for general corporate purposes.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
While we may be engaged
in various claims and legal proceedings in the ordinary course of business, we are not involved (whether as a defendant or otherwise)
in and we have no knowledge of any threat of, any litigation, arbitration or administrative or other proceeding which management
believes will have a material adverse effect on our consolidated financial position or results of operations.
INCORPORATION BY REFERENCE
As provided by in
the Company’s Registration Statements on Form F-3, as filed with the Securities and Exchanges Commission on September 18,
2012 and February 12, 2014, each as subsequently amended; this report is being incorporated by reference into such registration
statements.
SIGNATURES
Pursuant to the requirements
of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
|
Flamel
Technologies, S.A.
|
|
|
Dated: August
8, 2014
|
/s/
Michael S. Anderson
|
|
Michael
S. Anderson
|
|
Chief
Executive Officer
|
Avadel Pharmaceuticals (NASDAQ:AVDL)
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