The shareholders' group - OSS Capital Management - is insisting that Gerard Soula and his team are not doing enough to develop the firm's drug delivery technologies, and that new blood is needed to take the business forward. Not so, says Soula in a letter to shareholders published today, aimed at bolstering support ahead of the firm's annual shareholders meeting on 22 June.
Flamel's business has been built around two polymer-based delivery technologies for medical applications - the Medusa technology, designed to deliver therapeutic proteins and Micropump, a controlled release and taste-masking technology for the oral administration of small molecule drugs.
The frustrations voiced by OSS and its principle, Oscar Schafer, relate to the speed at which licensing deals for the drug delivery technologies are being signed. Flamel has had a mixed bag of news over the last 18 months, losing some partners while being unable to secure new ones, and this has prompted an attack by OSS that is rapidly becoming personal.
There has been much excitement at Flamel about Medusa, which takes the form of a nanoparticle with the active protein to be delivered residing on its surface rather than inside. The primary advantage of this is that external presentation requires no use of solvents and other chemical processes that can reduce the proteins activity. The protein is injected subcutaneously and is slowly released from the surface of the nanoparticle and absorbed into the bloodstream.
Unfortunately, the technology has been marked by a number of false starts. The company's Basulin (insulin) product was initially picked up by Novo Nordisk, but the latter exited the agreement in 2002. The drug is a once-daily version of recombinant human insulin and, as such, is differentiated in the marketplace from once-daily insulin analogues and human insulin requiring multiple injections each day.
Bristol-Myers Squibb took up the Basulin reins last year with a $165m licensing agreement, but dismounted from the project after a wide-ranging review of its R&D pipeline led to a number of projects being sidelined. Crucially, B-MS had no existing franchise in insulin, despite a presence in oral diabetes drugs.
Meanwhile, there have been other disappointments for the Micropump technology, which takes the form of microparticles coated in a polymer that controls the diffusion of active drug out of a central reservoir. It is designed to retain small molecule drugs for longer in the small intestine, and is particularly suitable for delivery compounds with a narrow window of absorption.
In March, Biovail pulled out of an agreement to develop a Micropump formulation of the antiviral drug acyclovir called Genvir, after failing to meet its own schedule for starting pivotal trials of the herpes treatment. And in late 2003 GlaxoSmithKline exited a pact to develop a Micropump version of its blockbuster antibiotic Augmentin (amoxicillin/cluvulanate) 'for commercial reasons'.
Clear the decks
Importantly, Schafer et al say that these disappointments do not relate to the quality of the technology platforms. Indeed, GSK is still working with the company on a Micropump formulation of its beta-blocker Coreg (carvedilol), and Flamel is still bringing in milestone revenues from a partnership for a Micropump version of TAP's gastrointestinal drug Takepron (lansoprazole).
However, Schafer and OSS take issue with the failure to sign new partners for the projects. They want to replace the entire Flamel management with a new team, led by Schafer himself and also including former Enzon chairman Randy Thurman
Responding to the OSS claims, Soula maintains in today's letter that "five product are today in discussion for licensing. Two others could be available before year-end. The company has a strong cash position to sign deals on good terms."
Potential deals - with more than 12 companies - are in the frame for Basulin, Genvir, Augmentin, an unnamed compound, the opioid analgesic oxycodone and the biologics interferon-alfa and interleukin-2, according to Soula.