Flamel Technologies, Inc

Flamel Technologies Announces Breakeven Quarterly Results based on Operating Achievement; Increase in Cash Position to $11.9 million

Lyon, France, July 25, 2002 – Flamel Technologies S.A. (NASDAQ: FLML) today announced its financial results for the second quarter of 2002.

For the second quarter, Flamel reported total revenues of $4.4 million, compared to $2.4 million in the second quarter of 2001. Expenses increased to $4.4 million, from $3.9 million in the second quarter of 2001. Net loss in the second quarter of 2002 was $68 thousand, compared to a loss of $1.4 million in the first quarter of last year. Net loss per share for the second quarter of 2002 was $0.00, compared to a net loss per share in the second quarter of 2001 of ($0.08). Cash on hand at the end of the quarter was $11.9 million, up from $5.3 million at December 31, 2001, with an additional $3.5 million in accounts receivable as of the end of the second quarter.

Flamel's second quarter revenues included license and research revenues of $4.4 million, which included a $1.5 million milestone payment from Servier in respect of the licensing agreement announced in January 2002. These revenues exceeded license and research revenues of $2.4 million in the second quarter of 2001. Product sales and services increased to $1.1 million, compared to $0.4 million in the second quarter of 2001, reflecting increased sales of polymer to Corning and greater toll manufacturing revenues. Royalties to Flamel on sales of Corning's Sunsensor® products increased to $0.3 million from $0.2 million in the second quarter of last year.

Costs and expenses of Flamel increased to $4.4 million, from $3.9 million in the second quarter of 2001, largely as a result of the increase in costs of goods and services sold. Research and development costs increased to $2.7 million from $2.6 million in the second quarter of 2001. SG&A increased to $0.9 million from $0.8 million, while costs of goods and services sold increased to $0.8 million, from $0.5 million, reflecting sales of polymer to Corning and increased toll manufacturing.

"This has been a very significant quarter for Flamel," said Gerard Soula, president and chief executive officer of Flamel. "Flamel has continued to demonstrate achievements in this quarter in each of the three fundamental areas of our strategy: 1) delivery of technical results, 2) achievement of significant partnerships with major pharmaceutical companies, and 3) preservation of a strong financial position. This quarter we have achieved further technical success with Servier which is reflected in the payment of a $1.5 million milestone, following closely on the $3 million payment received from Servier last quarter. We were also pleased to announce a licensing agreement with GlaxoSmithKline for augmentin, the blockbuster antibiotic. Finally, our cash position is substantially improved, with cash levels more than double what we had six months ago."

"This is the third quarter of breakeven or positive net income for Flamel,'' said Stephen Willard, chief financial officer of Flamel. "This quarter is significant as we have begun to achieve milestone payments under our existing deals, as well as executing new ones. Flamel is committed to preserving a strong financial position as we move forward to capitalize on our investment in, and technical success with, our two platform technologies."

Flamel Technologies S.A. is a biopharmaceutical company principally engaged in the development of two unique polymer-based delivery technologies for medical applications. Flamel’s Medusa^®nano-encapsulation technology is designed to deliver therapeutic proteins. Micropump^® is a controlled release technology for the oral administration of small molecule drugs. Flamel’s expertise in polymer science has also been instrumental in the development of a photochromic eyeglass lens product now marketed by Corning Inc. Additionally, Flamel has developed new herbicide delivery systems now being tested by Monsanto and has patented a biomaterial, ColCys™.

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, 2001.

FLAMEL TECHNOLOGIES S.A.
CONSOLIDATED STATEMENT OF OPERATIONS
(Amounts in thousands, except per share data)

Three months ended

Six months ended

	June 30 2002 US $	June 30 2001 US $	June 30 2002 US $	June 30 2001 US $
Revenues
Licence and research revenue	2,994	1,834	5,360	4,224
Product sales and services	1,094	389	1,314	1,139
Royalties and other income	322	210	2,931	538
Total revenues	4,410	2,433	9,605	5,901

Costs and expenses
Cost of goods and services	(781)	(499)	(1,081)	(1,236)
Research and development	(2,741)	(2,621)	(5,695)	(5,287)
Selling, general and administrative	(860)	(767)	(1,791)	(1,688)
Stock compensation expense	(5)	(7)	(10)	(13)
Total costs and expenses	(4,387)	(3,894)	(8,577)	(8,224)

Profit/(Loss) from operations	23	(1,461)	1,028	(2,323)

Interest income, net	61	68	78	138
Foreign exchange gain	(152)	33	(147)	56

Net Income, (Loss)	(68)	(1,360)	959	(2,129)

Net Income,(Loss) per ordinary share	$(0.00)	$(0.08)	$ 0.06	$(0.13)

Weighted average number of ordinary shares outstanding	16,198	16,198	16,198	16,198