BioWorld International Correspondent

PARIS - Flamel Technologies SA filed a preliminary prospectus supplement to its recently filed shelf registration statement with the SEC relating to a proposed underwritten offering of 3.8 million ordinary shares in the form of American Depository Shares, consisting of 2 million shares of common stock offered by the company and 1.8 million shares from an existing shareholder.

Merrill Lynch & Co. is acting as the lead underwriter for the offering, while UBS Securities LLC, SG Cowen Securities Corp., Punk Ziegel & Co., Merriman Curhan Ford & Co. and Brean Murray & Co. Inc. are acting as co-managers. Underwriters have an overallotment option of 570,000 ordinary shares in the form of ADSs.

The company has been listed on Nasdaq since June 1996, when it raised $30 million in an initial public offering. In May 1998, it raised a further $10 million through the sale of 2 million shares, or 14 percent of its equity, to the French holding company Financière et Industrielle Gaz et Eaux. In March 2000 it completed a private share placement worth $12.8 million with three venture capital funds - Biotechnology Value Fund and Alta BioPharma Partners, both of San Francisco, and New York-based Chase Capital Partners.

As at June 30, Flamel had 16.3 million shares outstanding and cash and liquid investments of $11.6 million. In the first half of 2003 it generated revenues of $9.5 million and posted a net loss of $3.3 million.

The company received a boost at the end of August when it signed a $165 million licensing and commercialization agreement with New York-based Bristol-Myers Squibb Co. covering Flamel's human insulin product, Basulin. The agreement gave BMS exclusive worldwide rights to Basulin and provided for Flamel to receive an up-front payment of $20 million plus potentially $145 million in milestone payments. It would receive double-digit royalties on future sales.

Medusa is one of two polymer-based drug delivery systems developed by Flamel, the other being Micropump. While Medusa is designed to deliver therapeutic proteins, Micropump is a controlled-release, taste-masking system for the oral administration of small-molecule drugs.

Flamel's stock (NASDAQ:FLML) rose 60 cents Monday to close at $35.25.