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FLAMEL TECHNOLOGIES REPORTS 1999 RESULTS Lyon, France, March 1, 2000 – Flamel Technologies (Nasdaq: FLML) today announced its financial results for the fourth quarter and year ended December 31, 1999. For the quarter, the company reported total revenues of $7.0 million, or Euros 6.7 million, compared to $2.9 million, or Euros 2.5 million, reported for the fourth quarter 1998. License and research revenues in the quarter were $5.6 million, or Euros 5.4 million, compared to $2.4 million, or Euros 2.0 million, in the fourth quarter last year and included $5.0 million received from Novo Nordisk on the signing of the development and license agreement for Flamel’s long-acting insulin product, Basulin™. License and research revenues in the fourth quarter 1998 included $2.0 million related to the research and development agreement signed with Corning Inc. in that quarter. Product sales and services revenues in the quarter were approximately $1.0 million, or Euros 1.0 million, compared to $0.4 million, or Euros 0.4 million, reported in the fourth quarter last year. Sales of photochromic material to Corning Inc. account for this increase. Other revenues in the fourth quarter of 1999 totaled $0.4 million, or Euros 0.4 million, compared to $0.1 million, or Euros 0.1 million, and include $0.2 million related to the forgiveness of a French government loan, and approximately $0.15 million in royalty income from Corning. Total expenses in the quarter were $5.0 million, or Euros 4.8 million, compared to $4.9 million, or Euros 4.2 million, in the fourth quarter last year. While total expenses were relatively consistent with the previous year, the company recognized an increase in administrative expenses related to the closing of the US administration office. These expenses were offset by decreases in research and development expenses and costs of goods and services. The company reported a net income of $2.2 million ($0.17 per share), or Euros 2.1 million (Euro 0.16 per share), for the fourth quarter 1999, compared to a net loss of $1.6 million ($0.12 per share), or Euros 1.3 million (Euro 0.10 per share), reported for the fourth quarter of 1998. For the year, the company reported higher total revenue of $11.0 million, or Euros 10.4 million, compared to $9.5 million, or Euros 8.2 million, reported for the fiscal year ended December 31, 1998. In 1999, license and research revenues totaled $7.3 million, or Euros 6.8 million, compared to $4.3 million, or Euros 3.7 million, in 1998. This increase is the result of the initial fees received from the signing of the agreement with Novo Nordisk in December 1999. Product sales and services for 1999 totaled $3.2 million, or Euros 3.0 million, compared to $5.0 million, or Euros 4.3 million, in 1998. This decrease is the combined result of the lower scheduled manufacturing activity related to the company’s contract with SmithKline and lower sales of photochromic material as Corning utilized its initial stocks sold in 1998. Other revenues in 1999 totaled $0.6 million, or Euros 0.5 million, compared to $0.2 million, or Euros 0.2 million, reported for 1998. This increase is the result of royalties from Corning related to the l999 launch of their new photochromic lens product and the forgiveness of French government loan to the company. Total costs and expenses for the year were $18.0 million, or Euros 16.9 million, compared to $18.8 million, or Euros 16.1 million, reported for the year ended December 31, 1998. Lower costs of goods sold related to the lower manufactured volumes, partially offset by increased research and administrative expenses accounted for this overall decrease in costs. For the year ended December 31, 1999, the resulting loss from operations was $7.0 million, or Euros 6.6 million, compared to a loss from operations of $9.3 million, or Euros 8.0 million, reported for the year ended December 31, 1998. For the year, the company reported a negligible tax expense compared to a tax benefit of $1.2 million, or Euros 1.1 million, reported for the year ended December 31, 1998. An income tax benefit in 1998 was primarily related to a tax favored mix of research and development expenses that was not relevant to the mix of necessary research and development expenses in 1999. The company reported a resulting net loss of $6.7 million ($0.52 per share), or Euros 6.3 million (Euro 0.49 per share), for the year ended December 31, 1999, compared to a net loss of $7.8 million ($0.65 per share), or Euros 6.7 million (Euro 0.56 per share), reported for the year ended December 31, 1998. Flamel ended the year with $5.2 million in cash and short-term investments, compared to $11.7 million at December 31, 1998. "We are pleased to report that Flamel accomplished several significant achievements in 1999. Throughout the year we primarily focused on the further development of our premier product, Basulin™, a unique long-acting insulin product. Our efforts culminated in the launch of a Phase I study in October and the year-end signature of a product development and licensing agreement with Novo Nordisk, a world leader in supplying insulin products to diabetics," stated Dr. Gerard Soula, Flamel’s President and Chief Executive Officer. "Basulin™ is the first product based on Flamel’s unique Medusa® technology for the controlled release of therapeutic proteins and peptides. It has the potential to provide a major improvement in the long-term treatment of diabetes." Commenting further, Dr. Soula said, "Although we were faced with cash constraints throughout much of the year and the company made prudent, albeit difficult, decisions to delay continued development on several projects, we did make notable progress in the laboratory in the application of Medusa® to alpha interferon, another important therapeutic compound. Additional highlights of the year include Flamel’s receipt of its first royalty income and Corning’s successful test marketing and commencement of a launch of its new photochromic eyeglass lens product. This was the first launch of an innovative product incorporating technology developed by Flamel. It is an achievement of which we are particularly proud. "Also in 1999, we received approval of Asacard™ 162.5mg from several European countries related to the earlier submission based on approval in the United Kingdom. Marketing plans for Asacard™ are not yet complete as we await the completion of the large, ongoing Phase IV study launched early last year," said Dr Soula. "We also announced today, the company closed a $12.8 million private placement. These funds will allow us to continue to advance the development of our current products as well as seek new opportunities in 2000." Flamel also announced that Barbara Sherrill, its Chief Financial Officer, recently left the company to pursue other interests. She has continued to work with the company as a consultant through the transition period. Flamel Technologies S.A. is principally engaged in the development of advanced polymer technologies for unique medicinal applications. To meet important medical needs and develop commercially valuable products, the company is building on its primary technology platforms: the Medusa® system for the controlled peritoneal delivery of proteins and peptides, and the Micropump® system for the controlled delivery of certain oral drugs. Asacard, Agsome, Basulin and Colcys are trademarks, and Micropump® and Medusa® are registered trademarks of Flamel Technologies. Note: This document contains a number of matters, particularly as related to the status of various research projects and technology platforms, that constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. The presentation reflects the current view of management with respect to future events and is subject to risks and uncertainties that could cause actual results to differ materially from those contemplated in such forward-looking statements. These risks include risks that products in the development stage may not achieve scientific objectives or milestones or meet stringent regulatory requirements, uncertainties regarding market acceptance of products in development, the impact of competitive products and pricing, and the risks associated with Flamel’s reliance on outside parties and key strategic alliances. These and other risks are described more fully in Flamel’s Annual Report on the Securities and Exchange Commission Form 20-F for the year ended December 31, 1998.
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