Despite words to the contrary, Flamel's $20M acquisition is a clear drug delivery play

Flamel Technologies ($FLML) officials sold the $20.25 million takeover of Charlotte, NC's FSC Pediatrics as part of the company's "journey from a pure drug delivery company to a diversified specialty pharma company," but then went on to describe how each of the new products in its portfolio counts drug delivery as one of its key differentiators. Whether done purposefully or not, it just goes to show the importance of drug delivery, even to those who strive to be diversified players.

CEO Michael Anderson said FSC's AcipHex Sprinkle for gastroesophageal reflux disease (or acid reflux) provides access to the largest market among the four new additions, worth more than $700 million.

"AcipHex Sprinkle can be sprinkled on a small amount of soft food, like applesauce or fruit or vegetable-based baby food or yogurt, or the capsule granules can be emptied into a small amount of liquid, such as infant formula, apple juice or pediatric electrolyte solution," he said during a Feb. 8 conference call with Wall Street following the deal's announcement.

"As you also may know, the proton pump inhibitor market has kind of moved over-the-counter. So, while you can buy alternatives and chewable tablets and so forth from all sorts of different proton pump inhibitors over the counter, we think the ability of a pediatrician to be able to prescribe this one and the designation for its use down to children one years of age is a big plus for us," he added.

Also added to the Flamel portfolio is Karbinal ER, which fits into a $100 million-plus market. Launched in September, Karbinal ER is an H1 receptor antagonist indicated for children two years of age or older. "It's the only first-generation extended release oral suspension antihistamine available today in the United States. Karbinal ER provides physicians with a new, effective and easy-to-use treatment option for children with seasonal and perennial allergic rhinitis that need symptomatic relief for a runny nose, sneezing, itchy nose or throat, and itchy or watery eyes," Anderson said.

In addition, Flamel takes over the U.S. rights to the only oral suspension of the generic antibiotic Cefaclor for the treatment of otitis media, lower respiratory infections, pharyngitis, tonsillitis, urinary tract infections, and skin and skin structure infections caused by susceptible organisms. The product was launched in mid-2015, after FSC acquired exclusive U.S. marketing rights from Taiwan's Yung Shin Pharmaceutical Limited.

FSC also makes a drug delivery device that improves the drug delivery of metered dose inhalers and minimizes the adherence of their medication to the walls of the chamber itself.

"The other sleeper product here is the Flexichamber, which, as you know, is sold by prescription only. It's typically specified by the pediatrician when he or she writes a prescription for a MDI of any description. And the beauty of this particular product is that it's been designed to be able to be folded up easily by a child, twist it back together and put it in your pocket, so the child could administer their dose right on the playground if they wanted. It offers a meaningful advantage," Anderson said, adding, "This is an area where there's been an awful lot of focus over the last couple of years, still $50 million to $70 million according to IMS. And we believe there are some unique things you could do to build this marketplace up."

The company will pay the $20.25 million over 5 years to previous FSC owner Deerfield Capital, with the final payment of $15 million due in January 2021. It also owes Deerfield a 15% royalty on FSC product sales worth up to a maximum of $12.5 million per year for a period not exceeding 10 years.

Anderson said Flamel's two previously existing meds produced revenue of about $170 million in 2015. 

- read the release

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