Stephen Willard – CEO Siân Crouzet – Principal Financial Officer

Matt Kaplan – Ladenburg David Moskowitz – Madison Williams Investment Company Peter Butler – Glen Hill Investments Peter Lux [ph]

Thank you very much, Mark. And good morning, ladies and gentlemen.

We open, as always, with the forward-looking statement language, which is set out at the conclusion of today’s press release. All statements made on this call are subject to a variety of future events and risk factors, including those set forth in our filings with the SEC, particularly our Form 20-F, which are all publicly available.

Please review them, as they are directly applicable to every element of this call. 2010 was a solid year for Flamel.

We have advanced our projects in development with partners. The most important of these programs continues to be the long-acting beta interferon project that we are undertaking with Merck Serono.

In the fourth quarter, we announced receipt of two payments totaling 4 million euros; the first related to our first clinical milestone for the development program and the second payment with respect to a technical achievement that we made at Merck Serono’s request. We are pleased with the progress that we have made on this program and believe that we are creating substantial value, both on a standalone basis but also with respect to the validation that our success with beta interferon can bring to the entire Medusa platform.

We did fall short on our expectation of delivering two new license agreements in 2010, and I’m well aware of the disappointment felt by us all. This expectation was based on the nature of discussions that were underway at the time of our last conference call.

Those discussions have obviously proceeded more slowly than we anticipated due to a variety of factors. I should emphasize that these discussions are still ongoing, as we mentioned it in the press release issued yesterday.

Throughout all our current discussions, we are mindful that the best agreements are not concluded at the highest price. Our focus is to arrive at terms that fairly reflect the value created for each individual program and partner, while bearing in mind that we have a portfolio of opportunities that we are developing, of which we deserve to be fairly compensated.

We’ve been scrupulous in balancing these considerations. We strongly believe in the work that we are doing and that we will arrive at mutually beneficial terms that fairly reflect the value that we are creating for our partners.

One of our successes in 2010 was that we advanced the technology of our two intellectual property platforms in some very key ways. In addition to the clinically proven improvements in efficacy and safety that Medusa has already demonstrated, we now have data that demonstrate the improvements the platform delivers with respect to important additional issues.

Specifically, we have shown that Medusa, one, prevents protein aggregation; two, substantially enhances the solubility of insoluble or purely soluble drugs; and three, we can increase the stability of fragile proteins in peptides, which is very important for the pharmaceutical industry. As always, we are able to achieve these improvements without chemically or otherwise altering the molecules, which we believe lowers the risk associated with the programs that we are developing with our partners.

With respect to Micropump, we now have clinical results that show we are able to control and extend the release of small molecules and a long acting liquid formulation, as well as our previous success with tablets and capsules. We believe that this technology is applicable across a wide spectrum that covers both over-the-counter and prescription drugs.

We are working actively to license Micropump in these areas. This is the time of the call that I would normally turn it over to Siân for the financial portion of our prepared remarks.

For obvious reasons, I will be picking up her role after she says a word or two.

Good morning. As Steve has said, I think for obvious reasons that (inaudible) Steve to present the financial results today that I would normally have presented in other cases.

I’m very grateful that I have Siân here with me despite significant case of something or other. But I’m always grateful for her, both on these calls and day-to-day as we work together at Flamel.

Regarding our financial results, our fourth quarter profitability was a function of our success in working to develop the long-acting beta interferon product with Merck Serono as well as our ongoing commitment to tightly controlling costs. During the fourth quarter, our revenues grew to $13.5 million.

Our license and research revenues of $8.8 million included the milestones from Merck Serono, as previously mentioned. For the year 2010, license and research revenues were $19.7 million, representing more than 50% of our total revenues of $37.1 million and maintaining the trend from 2009.

In the last quarter of 2010, royalty income grew from $1.7 million to $2.4 million. Coreg CR continues to enjoy exclusivity without generic competition.

Sales have stabilized over 2010, generating a relative stability in our annual royalty revenue. Product sales in the fourth quarter were $2.2 million, which is higher than the average of the previous there quarters of 2010.

For the full year, product sales reached $8.2 million, as they reflect ongoing demand from GSK for the product. I should mention that we continue to supply Coreg CR microparticles to GSK while we negotiated new supply agreements.

Costs and expenses during the quarter were $11.4 million as compared to $16.5 million in the year-ago period. We were successful in reducing costs and expenses across all our major categories and continue to benefit from tax credit on our eligible R&D costs.

SG&A declined to $2.7 million from $4.0 million in the fourth quarter of 2009. Research and development expenses were at $6.9 million this year versus $9.0 million in the fourth quarter of last year.

And cost of goods and services sold were $1.9 million versus $3.6 million a year ago. For the year, costs and expenses decreased to $47.0 million compared to $53.9 million in the year-ago period.

And again, this decline was across all three major cost categories. The licensing discussions that we are currently having may increase our R&D expenses going forward, as several of the projects being negotiated are for new molecules using the Medusa and Micropump platforms.

That said, our expectation is that our partners will finance this additional research and development costs. At the end of the fourth quarter, our cash and cash equivalents totaled $31.3 million versus $32.1 million at the end of the third quarter.

And now, Steve will return to the strategic elements. As just described, we enjoyed strong financial results in the fourth quarter and we are able to maintain our cash position above $30 million during the year despite currency fluctuations, which reduced the amount of cash as reported in dollars.

We are in a strong position due to our conservative financial approach and the number of relationships that we have. As many of you are aware, we have focused on leveraging our technology platforms and drug delivery expertise using our partner resources and experience in drug development, regulatory affairs and marketing.

This lessens the risks that are associated with each potential opportunity that we address while substantially maintaining the upside that we may enjoy as a function of meeting milestones and commercial status. Our work on beta interferon is especially exciting in this respect, given that the beta interferon market is currently over $6 billion, and we have a substantial product opportunity in a subcutaneously injected long-acting beta interferon.

There are drawbacks to this conservative approach. As an example, last year we developed a long-acting formulation of a liquid analgesic that is commonly administered to children as an over-the-counter remedy.

This is a molecule that has never been formulated as an extended release formulation. So we were extremely pleased when we met the target product specifications that were set for us by our partners.

However, certain marketing and regulatory considerations concerning the molecule came up late last year that the partner has decided not to proceed with the liquid formulation at this time. At the outset of the call, I alluded to the work we have completed on the Micropump technology with respect to liquids, and we continue to believe that this can be an important value driver going forward.

This technology is entirely proprietary and is applicable to a wide variety of molecules that have never been formulated in this way. We also expected that we would be able to publish top line results for our interferon alpha Phase 2 trial that is being conducted by the French government.

The ANRS, that’s the acronym for the French government agency, has been very generous in conducting the trial on the Medusa-enabled formulation of interferon alpha. We believe that the data should serve to confirm earlier results that showed a statistically significant reduction in viral loads as well as fewer side effects.

We are still awaiting completion of the trial however. Lower than expected trial enrollment as well as a production problem with the comparator drug, not our drug, but the drug to which our drug is being compared, which is called PegIntron, has caused the delay.

Because we do not control the trial, we cannot be certain when we will be able to publish top line results. Although the feedback that we have received thus far has been positive, which encourages us, we believe that the interferon alpha trial is a great showcase but one of the many strengths of Medusa platform that it can be used to make already marketed molecules, more efficacious and safe.

The previous trials that we have conducted bear this out, and we believe that the results are directly applicable to a wide variety of other molecules. This improvement in safety and efficacy as well as greater patient convenience is achieved without gorilla modification of the molecule, which we believe should result in a shorter regulatory pathway and lesser risk for Medusa development programs in general compared with competing technology platforms.

We think that this is a tremendous advantage that is becoming increasingly important, especially given the attention that the industry is now paying to the areas of follow-on biologics and Biobetters. Whether the programs are being done by established players such as Merck Serono or newcomers to the markets seeking to develop superior generics, we believe that the value added from the Medusa platform is very great and that it comes with less risk as compared to competitive technologies.

Addressing unmet medical needs while using an existing molecule is perhaps the clearest example of Medusa’s value. Other advantages are that we can solve other important issues.

As I mentioned, we have shown that Medusa can solve problems with protein aggregation or solubility and biologic instability. Because we are not modifying the molecules themselves, we believe our approach lowers the risks associated with these projects.

We are very pleased with these results, which have also been demonstrated to work where multiple molecules are being administered. We believe that the Medusa platform advantages are now well characterized, and the work that we have undertaken over the past several years is becoming widely appreciated.

We are highly focused on converting the programs that have yielded these data into strong commercial license and development agreements that are consistent with the strengths of the technology and the company as a whole. The fact that so many companies – large pharmaceutical companies are either facing a patent cliff or have just seen many of their best-selling drugs face generic competition is an opportunity for us in my opinion.

Both Micropump and Medusa may be used to create lifecycle management solutions. And obviously that is a strategy that the industry is well familiar with.

But there are scores of molecules on the shelf that did not advance in the clinic due to solubility and stability issues that Medusa and Micropump can address. These molecules, in some cases, have shown tremendous promises that have not as yet had a delivery technology to maximize their commercial viability.

By offering solutions to companies and helping them potentially to monetize these assets, we believe we are well positioned to address the current industry dynamics. Furthermore, we can create new formulations of existing molecules that may have side effects and efficacy advantages that are superior to current formulations of molecules.

We hope that if Big Pharma shifts away from an almost single-minded recent focus on acquiring late-stage new molecules, they will see the advantage of superior formulations of existing drugs, particularly when such formulations are accompanied by strong intellectual property. I would also like to update everyone regarding our work with GSK on Coreg CR.

As discussed on prior conference calls, Flamel submitted a citizen’s petition last year in April to share our concerns that any potential generic formulation of Coreg CR demonstrates the same advantages that were required of Coreg CR in order to be approved. The FDA granted our petition in part last October, and to date, the generic formulation submitted by mutual pharmaceuticals has not been approved.

This past December 31, the supply agreement that we had with GSK expired. And since then we have continued to supply GSK with Coreg CR microparticles.

We are engaged with GSK in discussions regarding a new supply agreement and expect that these should be successful. And with that, Mark, we would now be most interested in any questions.

Good morning, Steve and Siân. Can you hear me?

Good morning, Matt. We can.

Great, great. I think I’m going to break the rules from the get-go.

I’ve got more than one question if that’s okay.

All right.

Okay. Starting up, just can you talk a little bit about your goals and objectives for 2011 in terms of the business development activities and then maybe talk a little bit about how those could translate to revenues?

I’m sorry. I was cut off.

Your voice broke up. Could you repeat your question again?

I’m sorry.

You bet. You bet.

No problem. Talk a little bit about your goals and objectives for 2011 in terms of your business development activities and then if you could comment on how they could translate to potential revenues as well.

Sure. As you know, we have a large number of already existing partnerships that many of which are into the clinic.

And so I think one of our major goals for 2011 is to receive the milestones and have equally – further visibility as well with regard to what the molecules are, who the partners are. And I think if those are successful, there would be significant economic benefits to those.

We also are in negotiations for a number of additional molecules with partners that we are currently not working with. Those molecules are in several cases blockbuster drugs.

And I would certainly hope in 2011 that we might have success with one or two of those. I have learned my lesson and will not try to predict the timing because Big Pharma works under its own timetable.

But people really do understand the unique benefits that our technology platforms bring. We now have the credibility by working with half the industry.

We have tremendous greater data than we’ve had at any other point in our history. And so I think 2011 will be a very strong year, both for moving existing projects into large milestone payments and greater visibility, but also a great opportunity for some large deals with people with whom we are not currently working.

Great. And in your prepared remarks, you talked a little bit about the alpha interferon trial.

Can you give us an update in terms of the enrollment status of that study? Are you half enrolled, quarter enrolled?

Where does that stand?

I’m supposed to have a meeting on it tonight as a matter of fact. I don’t have someone here who knows the exact numbers.

I believe it’s more than half, but I can’t tell you what the exact numbers are.

Right. And in terms of the existing collaboration, can you update us on the status of your blood protein coagulation programs that you have with Baxter and Pfizer?

I can’t because of the confidentiality. As we have discussed before, we have a major new initiative to – now that we have so many partners and greater strength, we are trying to get our partners to release us from some of the confidentiality provisions that we have in our existing contracts.

But with regard to those, I can’t – I'm not able to speak about those yet. Could I ask you to jump back in the queue, Matt, as I want to be sure to have all the analysts.

Thanks.

Thanks, Matt.

Thanks. Good morning, guys.

Congratulations on –

Good morning, David.

Congratulations on reporting a good quarter.

Thank you. Could you speak up just a little bit?

There seemed to be having – I had problems with Matt and I’m having a little bit of difficulty hearing you as well, David.

Yes, I appreciate it. I’m getting that complaint all morning from my phone.

Okay. So I want to quickly talk about the Coreg CR supply agreement with GSK.

First of all, why has this happened? Why has it come up?

Second of all, are you still supplying or are there any interruptions in the supply of your Coreg CR manufacture product at GSK? And three, on that issue, what do you believe – do you believe you are in a position of strength in these renegotiations or is this something where Glaxo can take advantage of the situation?

The first question, why did it expire, it had a fixed term, and the fixed term came to an end on the 31st of December. We are still supplying pursuant to the old arrangement while we work out something new.

We shipped as recently as last week. There won’t be any supply interruptions.

And I think this is a positive opportunity for us to have a good conversation with GSK, and I’m sure that we will come to an agreement. I do not foresee any negatives to the company from the situation.

But I won’t comment beyond that because we’re in discussions.

Okay. And you mentioned the partnerships that you weren’t able to announce at the end of last year.

It says in the press release that those discussions are still ongoing. And yet in your prepared remarks, you talked about mutually beneficial terms and those terms not always being where you would expect.

It makes me a little bit nervous on those discussions. So I guess my question is, do you still expect to bring forward those two partnerships?

And again, we don’t want to hang you back on promising them and when they could happen, but are they still on track for, I guess we could call it, in the near term? And again, I’m not asking you to commit to them, but we as investors have been counting on them and we want to know if we should still be counting on them or not.

A very fair question. And I believe that those transactions will get done.

Okay. And again – okay.

We’ll leave it at that. I’ll jump back in the queue.

Okay. Thanks, David.

Good morning, good morning.

Good morning, Peter.

Could you maybe comment a little further on the Coreg situation? It just seems like over the last several years that Flamel has added substantially to the value of that product, and including your citizen’s petition et cetera and your technology adding to making the product work.

And in other words, I mean, from the outside, it just looks like Flamel has contributed disproportionately to the success of that product. And if you are going to renegotiate, shouldn’t we be getting a better deal?

I appreciate your comment about what Flamel has done to help support Coreg CR, including citizen’s petitions and things like that. I think that is demonstrable evidence to all that we really try to be a great partner to Big Pharma.

With specific reference to the specifics of the negotiations with GSK, I can’t comment on that. But I appreciate the fact that we hope that people see and I think other pharmaceutical companies have seen the way that Flamel tries to go the extra yard to be a good partner.

And I think that will have benefits for our relationships with multiple large pharma companies.

So you’re regarding the negotiations as a good thing for Flamel, not a bad thing?

I don’t see any negatives to the situation right now. But in terms of positives, I really can’t comment.

Okay. One of the mysteries to me or the unknowns is that it seems like Flamel gets the benefit of substantial money from partners to offset research expenses.

And then also in the case of the alpha interferon, the French institute and/or the French government is supporting the research. And is there an aggregate number you can point to on how much this helped last year compared to the year before and how much you expect it to help in the future?

It seems like it’s a very substantial hidden plus in the Flamel story that we can get the partner to pay the research.

Yes. I mean, that’s a great point.

And I think we should put it in a press release or some other public forum. I can’t give it to you today because calculating the additional sort of benefits that we get on top of all of the revenues is something I don’t have exact numbers for.

But your point is very well taken, because for example, the clinical budget on Flamel products is, I believe it’s 10 times what we end up paying in terms of our own costs. The amount of work that’s being done by our partners in doing the clinical there, I’m pretty sure it’s much more than 10 times.

The amount of additional support that proves the value of our technology, which is then data that we’re able to use to not only work with those customers but attract other customers. It’s a very interesting question, and I’ll commit to trying to calculate up some of that value, because you’re right, it’s much more than just the dollars we get in to cover our costs.

There is tremendous value for Flamel in the work that our partners on our collaborations and get financial commitments on their part.

Okay. Is there a short answer to what’s the status report on the 28 research projects?

They have been going on for a couple of years now, and some of them should be completing Phase 1, Phase 2, maybe even Phase 3. Is it possible to get a handle on where we are with those projects?

Yes. Your question goes to what Matt Kaplan mentioned earlier, which is – what's exciting about 2011.

And you are quite right. There are a significant number of programs that have reached various stages of development and testing.

And we are – we do provide metrics on our website. I think additional metrics would be helpful, and that’s one of the things that we’re working with some outside advisors to try to develop additional metrics beyond what we keep on our website to give even greater visibility.

That is one of the most important goals and objectives of 2011 is to force our clients to allow us to disclose more than we have been able to do in the past. When we were a company with one or two partners and not much competition for our services, we had to take what we’ve got.

But now that we have more projects than we have the staff to take, we are in a position to really try to drive the greater visibility. And that is a top priority for me in 2011.

Sounds good. Thanks for the help, Steve.

Thank you, Peter.

Yes, thanks. Just a couple of questions.

First of all, on the Coreg CR supply agreement, are you guys the only approved manufacturer of the raw materials of this product?

Yes, we are the only possible supplier of the Micropump capsules – micro capsules. They give us the active and then we do the encapsulation.

And we are the only ones who can do that.

There are no other alternatives for GSK in terms of renegotiating or going out and getting another supply agreement with another manufacturer?

No.

And can you tell us when the next milestone might be for the long-acting Rebif product? And that includes Merck Serono in terms of them having an analyst day or something where we could see a visibility of the product or potential movement of this product through the clinic?

That will be controlled by Merck Serono. I don’t know when their next analyst day is or that sort of thing.

But Merck Serono won’t allow us to talk about the timing of that. We can say that’s in the clinic, and we can tell you about the milestones as we get them.

But this is obviously a very important program for them, and they are going to control the release of information.

Are you able to tell us what the next milestone that you could receive from them would represent?

I would love to, but I can’t.

Can you tell us what the currency effect was on cash in 2010? And again, last year you said you’d be cash flow positive –

Yes. It was about $3.1 million.

Okay. And again, last year you promised to be cash flow positive, that obviously didn’t happen.

Was that one of the partnerships that did not (inaudible) in the year?

Our expectation, yes, was that we would be cash flow positive, and the money that we were expecting as a result of what we thought we would be able to sign in 2010 would have been sufficient to have met the cash goal.

Okay. So I mean, if I take the $3.1 million out of the $13 million decline in cash balance, that leaves us with $10 million.

That suggests to me that these partnerships are worth plus-$10 million in cash coming in if you are able to (inaudible). Is that correct?

Yes. Having burned myself by predicting things, I’m trying to reform.

But that is logical, absolutely.

I appreciate that. But the calculation at least worked.

The calculation is absolutely accurate.

And I guess the last question I have is we’re expect including Micropump products to launch sometime in the near-term. Granted the agreement on the children’s OTC liquid sell-through, can you give us an update on when the next potential Micropump product could launch?

And I guess that, according to my notes, would be the long-acting pain products.

Those are in regulatory work right now. And as soon as – we'll have to hear from the regulators.

But there are other products that could come to market reasonably soon as there is favorable regulatory treatment.

Reasonably soon in 2011?

As I said, I’d like to at least for this call make no estimates or predictions. But I think – again, it will depend on regulatory decisions.

I don’t want to try to beat a dead horse, but we’re trying to see a very opaque business model. So I guess the question is, are we waiting for an FDA approval of these products?

Your questions are very fair. And I understand the frustration of the situation we are in.

We have – we are in front of the FDA, yes.

Hi, good morning. A follow-up on –

Good morning, Peter.

Good morning. How you doing?

Good. How are you?

I’m hanging in, which is very difficult with this company. But with that said, I’d like to follow on what some of the things that and sort of conceptually what Matt Kaplan said about the commerciability.

It seems that the obfuscation and fog that you think (inaudible) on, it doesn’t offer a clarity at all on the going forward situation. Is this the products you’re working on?

Is the secrecy is equivalent to the Manhattan project? To me, it’s just insane that we continue to follow that line.

With that said, my question is, perhaps given the size of the company and perhaps it’s time to link yourself with a larger, more powerful entity that perhaps has some leverage to bring these products to some commerciability.

I hear you. And I’m not sure it was a question, but – we have an obligation to consider all things at all times in terms of what’s best for the shareholders.

And we will always do that.

Well, it seems like the way we dance has not really benefited the shareholders. And this long, long process where we continue to offer nothing and hope for the best, maybe it’s time to take some more proactive action and bring these things or some commerciability and some profitability to the bottom line.

I agree with you, and we are working very hard to do that. Your comments are fair, and I agree that that is something we need to do.

Once again, we are very grateful for your interest in Flamel. We think that we have really had some wonderful opportunities to develop our technology and that it’s being recognized.

We greatly appreciate your interest in Flamel, and we hope to be talking with you again very soon. Thank you all very much for your time.