Cardiovascular Systems Buys Replidyne

“This is not a good deal for Replidyne. The deal values Replidyne on a net asset basis and Cardiovascular Systems does not value the company pipeline,” Argus Research Co. analyst Maggie Liu told Reuters.

Liu also said the deal lacked synergy as Cardiovascular Systems is a medical-device company, while Replidyne develops antibiotics.

However, Cardiovascular Systems’ Chief Executive David Martin said the combined entity would be a pure-play device company.

“The prospects for Replidyne were closed and any notion of an antibiotic company is gone,” Martin said by phone.

Small biotechnology companies with cash but failed or floundering products are in hot demand as partners for companies that are unable to raise money in the capital markets.

Replidyne, which stopped trials of its key antibiotic faropenem after it received a warning letter from US health regulators, has been trying to lure potential suitors with its strong cash position.

As of July 31, the company had $60.7 million in cash and cash equivalents, and current liabilities of $10.2 million.

“I think the process of finding a partner to merge into was a consequence of not finding a partner to develop their product,” Pacific Growth Equities analyst Gregory Wade said by phone.

Under the terms of the deal, Cardiovascular Systems’ shareholders will own 83% of the combined entity, while Replidyne shareholders will own the rest.

The combined company will apply for listing on Nasdaq under the symbol “CSII.”

The deal is expected to close in the first calendar quarter of 2009, following which Replidyne’s name would change to Cardiovascular Systems Inc.

SOURCE: Thomson Reuters