Monday, October 23, 2006

Replidyne: Silver Lining in FDA Letter

Following Replidyne’s (NASDAQ: RDYN) receipt of a non-approvable letter from the FDA for Faropenem® there are numerous reasons why there is a sliver lining in this non-approvable letter cloud.

First, and of paramount importance, the FDA had no SAFETY or Chemistry Manufacturing and Control issues. Second, the IP which covers composition of matter and methods of manufacturing are in place through 2015 with up to three additional years of protection through certain extensions. Third, a strong management team is backed by cash on hand of $134M (includes IPO proceeds) with a burn of approximately $30M however, certain additional capital needs for the required superiority and microbiological studies may be absorbed through a previous agreement with their partner Forest Labs (NYSE: FRX).

In short, a Post Action conference with FDA will be held. The news out of that meeting will provide insight as to the structures of the requisite studies to address the lack of placebo controlled data; recall that the studies were designed as non-inferiority (Faropenem® vs. current approved treatment). I would expect perhaps some additional information on 26 October, their scheduled earnings release date.

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