Wednesday, December 12, 2007

Good To Not So Great?

Replidyne (NASDAQ: RDYN) provided insight into their restructuring and pipeline prioritization initiatives. It is never good to hear about a local or any company for that matter have to shed people nevertheless there are a variety of silver linings in this re-org cloud. What stands out to me is the emphasis being placed upon the continued Phase III enrollment for faropenem in acute exacerbation of chronic bronchitis. With near 50% enrollment complete this trial may then yield results in 2008. Other indication studies for faropenem are sitting it out on the sideline until a new partner to take the place of Forest Labs (NYSE: FRX) is identified. With a little over $93M in cash on hand and a burn rate of approximately $11.5M per quarter there are ample resources to progress through the end of 4Q09. With the all-star management team in place I am confident that the requisite relationships to drive value will be assured.

In related search for the silver lining news take a look at this 3-month chart of Celgene (NASDAQ: CELG) versus Pharmion (NASDAQ: PHRM) below and note the new and now obvious correlation in movements. Recent news from Millennium Pharmaceuticals (NASDAQ: MLMN) in a rival oncology space for multiple myeloma drug pulled the CELG price down and now as the CELG price goes so goes PHRM. There is a critical threshold of $56.15 per share of CELG at deal close in order to maintain the buyout offer as-is. Looking at today’s close of $49.99 combined with analyst downgrades it is not boding well for the Pharmion acquisition close. The silver lining in this case is that the data for Celgene’s Revlimid is incredibly compelling with unprecedented survival rates. Question here is will the street recognize this new value opportunity in Celgene shares quickly enough not to impact Pharmion.

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