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Forest Ends Replidyne Pact

Regulatory uncertainty is cited.

Forest Laboratories


has called off a development and marketing deal with



, nearly four months after the smaller company's antibiotic was rejected by the Food and Drug Administration.

In October,

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the FDA turned down Replidyne's application for faropenem medoxomil, an oral antibiotic for acute bacterial sinusitis, skin infections, chronic bronchitis and pneumonia. The FDA said more clinical trials would be needed for each intended use.

Although Replidyne vowed Tuesday to continue working on the antibiotic, Howard Solomon, chairman and CEO of Forest, said the FDA's rejection letter "clearly raises regulatory uncertainty." A review of clinical trial data and the agency's comments prompted Forest to back out, Solomon said in a press release.

The companies signed a deal 12 months ago, giving Replidyne $50 million upfront and providing milestone payments, as well as royalties based on sales.

Forest's action isn't a surprise. Even before the FDA rejected the antibiotic, Forest executives said they would have needed FDA approval for two of the respiratory indications in order to market the drug.

The October rejection battered Replidyne, of Louisville, Colo., because faropenem had been its closest-to-market compound. The stock fell 45% when the FDA decision was revealed.

In regular trading Tuesday, the stock closed at $4.73, down 11 cents, or 2.3%. After hours, the stock lost another 74 cents, or 15.6%.

"We remain confident in the viability of faropenem," said Kenneth Collins, Replidyne's president and CEO, in a prepared statement. "Though the regulatory requirements for the approval of antibiotics have changed, we believe that faropenem can meet these new standards, and are we working closely with the FDA to define a regulatory pathway for faropenem approval."