Failure Sets Replidyne Back

Replidyne, Inc. (RDYN) discontinued the development of its lead clinical candidate, antibiotic Orapem, after failing to find a suitable partner for the drug. Additionally, discontinuation of the development program for anti-infective REP8839 and weak pipeline keep us on the sidelines.

The company had found the going tough ever since filing the new drug application for Orapem in January 2006. Issuance of an "approvable" letter for Orapem led to the termination of the development deal with Forest (FRX - Analyst Report).

Replidyne’s strategy is to develop and commercialize anti-infective compounds that address unmet medical needs. The largest commercial opportunity for Orapem is in the community pediatric setting and approval of the drug will grant Replidyne five years of marketing exclusivity in the U.S. and ten years in Europe.

The company announced a restructuring program in last December to conserve cash and suspended all development activities associated with its phase II candidate, REP8839, and reduce headcount by 35 percent. While the company’s current cash balance may last through 2009, we do not expect Replidyne to get any product on the market before 2013 at the latest.

Post the restructuring program and discontinuation of the development program of Orapem, the company has only anti-infective REP3123 in preclinical development. We maintain our Hold rating on the stock with a target price of $1.60 (with an expected market cap of $43.4 million).

Varun Parwal has contributed to this report.

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