Replidyne Terminates Trial Enrollment to Preserve Cash

It is never a good feeling to wake up and hear that a pivotal late-stage clinical trial has terminated enrollment. However, there is a silver lining in such a difficult decision cloud…that is the sophisticated management at Replidyne (NASDAQ: RDYN) are savvy enough to examine the risk-reward profile for the continued burn of their remaining $78M cash position.

The Acute Exacerbation of Chronic Bronchitis study that has been halted is one in a package of four clinical trials, including two in community-acquired pneumonia and one in acute bacterial sinusitis, recommended as a way forward by the FDA for a new drug application submission for faropenem to treat these three adult community respiratory tract infections. Replidyne has not initiated the other three trials, and consistent with prior guidance, further faropenem development will depend on the securing a partner for the program.

Replidyne is required to conserve its cash position in order to maintain their array of research programs and to pursue strategic transactions. With cash in hand their remains an opportunity to advance the variety of additional pipeline assets such as the Clostridium difficile, DNA replication inhibition and pediatric faropenem programs. It is likely that there are meaningful value inflection points that may be achieved with these programs versus the obvious value previously demonstrated via the data from the previous nine Phase III and 3,000 patients enrolled in prior faropenem trials.

In fact, in my humble opinion, there appears to be so much value in Replidyne today that I am prepared to deviate a bit from my standard CLSDF protocol and make a prediction here…The oral community antibiotic market is very large and lucrative, with an average of 250 million prescriptions and sales of $7.5 billion per year over the last eight years. So rather than a seeking a partner deal, similar to what was disrupted with Forest Labs (NYSE: FRX), I predict a 2008 M&A transaction, and because of the program platform and the continued focus there that a big pharma deal north of $1B is in the works. Potential suitors may be GlaxoSmithKline (NYSE: GSK) via augmentin®, Pfizer (NYSE: PFE) via zithromax®, Ortho-McNeil via levaquin® or Abbott (NYSE: ABT) via omnicef®, just to name a few potential suitors. We shall see what happens…

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