As filed with the U.S. Securities and Exchange Commission on January 26, 2009

Registration No. 333-155887

 

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

 

 

Amendment No. 3

to

Form S-4

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

 

 

 

 

Replidyne, Inc.

(Exact name of registrant as specified in its charter)

 

 

1450 Infinite Dr.

Louisville, CO 80027

(303) 996-5500

(Address, including zip code, and telephone number, including area code, of Registrant’s principal executive offices)

 

 

 

 

Kenneth J. Collins

President and Chief Executive Officer

Replidyne, Inc.

1450 Infinite Dr.

Louisville, CO 80027

(303) 996-5500

(Name, address, including zip code, and telephone number, including area code, of agent for service)

 

 

 

 

Copies to:

 

 

Approximate date of commencement of proposed sale to the public:  As soon as practicable after the effectiveness of this registration statement and the satisfaction or waiver of all other conditions under the merger agreement described herein.

 

If the securities being registered on this form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box.  o

 

If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  o

 

If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  o

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

(Do not check if a smaller reporting company)

 

 

 

 

The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment that specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

 

 

 

SUBJECT TO COMPLETION, DATED JANUARY 26, 2009

 

 

We are furnishing this proxy statement/prospectus to the holders of Replidyne, Inc.’s common stock and to holders of Cardiovascular Systems, Inc.’s common stock, Series A convertible preferred stock, Series A-1 convertible preferred stock and Series B convertible preferred stock.

 

Replidyne, Inc., or Replidyne, and Cardiovascular Systems, Inc., or CSI, have entered into a merger agreement pursuant to which a wholly owned subsidiary of Replidyne will merge with and into CSI, with CSI continuing as a wholly owned subsidiary of Replidyne. Immediately prior to the effective time of the merger, each share of CSI preferred stock will be converted into shares of CSI common stock at a ratio determined in accordance with the CSI articles of incorporation. At the effective time of the merger, each share of CSI common stock will convert into the right to receive that number of shares of Replidyne common stock as determined pursuant to the conversion factor described in the merger agreement. Replidyne will assume outstanding and unexercised options and warrants to purchase CSI common stock, and they will be converted into warrants and options, as applicable, to purchase Replidyne common stock in accordance with the same conversion factor. Replidyne stockholders, optionholders and warrantholders will continue to own and hold, respectively, their existing shares of and options and warrants for Replidyne common stock. Immediately after the merger, current stockholders of Replidyne, together with holders of Replidyne options and warrants, are expected to own or have the right to acquire between 16.3% and 17.0% of the combined company, and current CSI stockholders, together with holders of CSI options and warrants, are expected to own or have the right to acquire between 83.0% and 83.7% of the combined company, in each case assuming that Replidyne’s net assets at closing are between $35.0 and $37.0 million as calculated in accordance with the terms of the merger agreement, on a fully diluted basis using the treasury stock method of accounting for options and warrants.

 

Shares of Replidyne common stock are currently listed on the Nasdaq Global Market under the symbol “RDYN.” After completion of the merger, Replidyne will be renamed “Cardiovascular Systems, Inc.” and expects to trade on the Nasdaq Global Market under the symbol “CSII.” On          , 2009, the last trading day before the date of this proxy statement/prospectus, the closing sale price of Replidyne common stock was $      per share.

 

Replidyne is holding a special meeting of stockholders in order to obtain the stockholder approvals necessary to complete the merger and related matters. At the Replidyne special meeting, which will be held at 9:00 a.m., local time, on February 24, 2009 at Cooley Godward Kronish LLP, 380 Interlocken Crescent, Suite 900, Broomfield, Colorado, unless postponed or adjourned to a later date, Replidyne will ask its stockholders to, among other things, approve the issuance of Replidyne common stock pursuant to the merger and approve amendments to the Replidyne certificate of incorporation effecting a reverse stock split of Replidyne common stock, which is referred to as the reverse stock split, and changing the Replidyne corporate name to “Cardiovascular Systems, Inc.,” each as described in the accompanying proxy statement/prospectus.

 

CSI is holding a special meeting of stockholders in order to obtain the stockholder approvals necessary to complete the merger and related matters. At the CSI special meeting, which will be held at 9:00 a.m., local time, on February 24, 2009 at Cardiovascular Systems, Inc., 651 Campus Drive, St. Paul, Minnesota, unless postponed or adjourned to a later date, CSI will ask its stockholders to, among other things, approve and adopt the merger agreement and the merger contemplated therein.

 

After careful consideration, the Replidyne and CSI boards of directors have approved the merger agreement and the respective proposals referred to above, and each of the Replidyne and CSI boards of directors has determined that it is advisable to enter into the merger. The board of directors of Replidyne and CSI each recommends that its stockholders vote “FOR” the proposals described in the accompanying proxy statement. Several CSI stockholders have agreed with Replidyne to vote shares representing approximately 20% of the outstanding capital stock of CSI in favor of the merger and the other actions contemplated by the merger agreement. In addition, several Replidyne stockholders have agreed with CSI to vote shares representing approximately 32% of the outstanding common stock of Replidyne in favor of the issuance of the shares of Replidyne common stock pursuant to the merger and the other actions contemplated by the merger agreement.

 

More information about Replidyne, CSI and the proposed transaction is contained in this proxy statement/prospectus. Replidyne and CSI urge you to read the accompanying proxy statement/prospectus carefully and in its entirety. In particular, you should carefully consider the matters discussed under “Risk Factors” beginning on page 18.

 

This proxy statement/prospectus refers to important business and financial information about Replidyne and CSI that is not included in or delivered with this proxy statement/prospectus. Such information is available without charge to stockholders of Replidyne and CSI upon written or oral request at the following addresses: For information concerning Replidyne, Replidyne, Inc., Attn: Investor Relations, 1450 Infinite Drive, Louisville, Colorado 80027, or by telephone at (303) 996-5500; and for information concerning CSI, Cardiovascular Systems, Inc., Attn: Investor Relations, 651 Campus Drive, St. Paul, Minnesota 55112, or by telephone at (651) 259-2800. To obtain timely delivery, Replidyne stockholders must request the information no later than five business days before the date of the special meeting of Replidyne stockholders, or no later than February 17, 2009, and CSI stockholders must request the information no later than five business days before the date of the special meeting of CSI stockholders, or no later than February 17, 2009.

 

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the adequacy or accuracy of this proxy statement/prospectus. Any representation to the contrary is a criminal offense.

 

The accompanying proxy statement/prospectus is dated          , 2009, and is first being mailed to Replidyne and CSI stockholders on or about          , 2009.

 

Replidyne, Inc.
1450 Infinite Dr.
Louisville, CO 80027
(303) 996-5500

 

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
To Be Held On February 24, 2009

 

 

To the Stockholders of Replidyne, Inc.:

 

On behalf of the board of directors of Replidyne, Inc., a Delaware corporation, we are pleased to deliver this proxy statement/prospectus for the proposed merger combining Replidyne, Inc., or Replidyne, and Cardiovascular Systems, Inc., or CSI, a Minnesota corporation. The special meeting of stockholders of Replidyne will be held on February 24, 2009 at 9:00 a.m. MST, at Cooley Godward Kronish LLP, 380 Interlocken Crescent, Suite 900, Broomfield, Colorado, for the following purposes:

 

1. To consider and vote upon a proposal to approve the issuance of Replidyne common stock pursuant to the Agreement and Plan of Merger and Reorganization, dated November 3, 2008, by and among Replidyne, Responder Merger Sub, Inc., and CSI as described in the attached proxy statement/prospectus.

 

2. To authorize Replidyne’s board of directors to amend Replidyne’s restated certificate of incorporation in order to effect a reverse stock split of the issued and outstanding shares of Replidyne common stock in a ratio of up to one for 50, if and as determined by Replidyne’s board of directors.

 

3. To approve an amendment to Replidyne’s restated certificate of incorporation to change the name “Replidyne, Inc.” to “Cardiovascular Systems, Inc.”

 

4. To approve Replidyne’s assumption of the Cardiovascular Systems, Inc. 2007 Equity Incentive Plan to be used by Replidyne following the consummation of the merger, together with an increase in the number of shares of CSI common stock reserved for issuance under the plan from 3,379,397 to 3,879,397, which following the merger will be converted into shares of Replidyne common stock, subject to further adjustment for the reverse stock split anticipated before closing of the merger.

 

5. To approve an amendment to the Replidyne, Inc. 2006 Employee Stock Purchase Plan to (i) increase the number of shares of Replidyne common stock reserved under the plan from 305,872 to 1,920,872, subject to further adjustment for the reverse stock split anticipated before the closing of the merger and (ii) amend the “evergreen” provisions of the plan to provide that on July 1st of each year, beginning with July 1, 2009, the share reserve under the plan automatically will be increased by a number of shares equal to the lesser of (A) one percent (1.0%) of the total number of shares of Replidyne common stock outstanding on such date, or (B) 1,800,000 shares (subject to adjustment for the reverse stock split anticipated before the closing of the merger), unless Replidyne’s board of directors designates a smaller number of shares.

 

6. To consider and vote upon an adjournment of the special meeting, if necessary, if a quorum is present, to solicit additional proxies if there are not sufficient votes in favor of Replidyne Proposal No. 1, 2, 3, 4 or 5.

 

7. To transact such other business as may properly come before the special meeting or any adjournment or postponement thereof.

 

The board of directors of Replidyne has fixed January 21, 2009 as the record date for the determination of stockholders entitled to notice of, and to vote at, the special meeting and any adjournment or postponement thereof. Only holders of record of shares of Replidyne common stock at the close of business on the record date are entitled to notice of, and to vote at, the special meeting. At the close of business on the record date, Replidyne had 27,114,677 shares of common stock outstanding and entitled to vote.

 

Your vote is important. The affirmative vote of the holders of a majority of the shares of Replidyne common stock casting votes in person or by proxy at the Replidyne special meeting is required for approval of Replidyne Proposal Nos. 1, 4, 5 and 6 and the affirmative vote of the holders of a majority of the shares of Replidyne common stock having voting power outstanding on the record date for the Replidyne special meeting is required for approval of Replidyne Proposal Nos. 2 and 3. Even if you plan to attend the special

meeting in person, we request that you sign and return the enclosed proxy and thus ensure that your shares will be represented at the special meeting if you are unable to attend. If you sign, date and mail your proxy card without indicating how you wish to vote, your proxy will be counted as a vote in favor of Replidyne Proposal Nos. 1, 2, 3, 4, 5 and 6. If you fail to return your proxy card, the effect will be that your shares will not be counted for purposes of determining whether a quorum is present at the special meeting. You may revoke your proxy in the manner described in the proxy statement/prospectus before it has been voted at the special meeting. If you decide to attend the Replidyne special meeting, you may withdraw your proxy and vote in person.

 

By Order of the Board of Directors,

 

     Secretary

 

Louisville, Colorado

          , 2009

 

THE REPLIDYNE BOARD OF DIRECTORS HAS DETERMINED AND BELIEVES THAT EACH OF THE REPLIDYNE PROPOSALS OUTLINED ABOVE IS ADVISABLE, AND IN THE BEST INTERESTS OF, REPLIDYNE AND ITS STOCKHOLDERS AND HAS APPROVED EACH SUCH PROPOSAL. THE REPLIDYNE BOARD OF DIRECTORS RECOMMENDS THAT REPLIDYNE STOCKHOLDERS VOTE “FOR” EACH SUCH PROPOSAL.

 

Cardiovascular Systems, Inc.
651 Campus Dr.
St. Paul, MN 55112
(651) 259-2800

 

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
To Be Held On February 24, 2009

 

To the Stockholders of Cardiovascular Systems, Inc.:

 

On behalf of the board of directors of Cardiovascular Systems, Inc., a Minnesota corporation, we are pleased to deliver this proxy statement/prospectus for the proposed merger combining Replidyne, Inc., or Replidyne, a Delaware corporation, and Cardiovascular Systems, Inc., or CSI. The special meeting of stockholders of CSI will be held on February 24, 2009 at 9:00 a.m. CST, at Cardiovascular Systems Inc., 651 Campus Drive, St. Paul, Minnesota, for the following purposes:

 

1. To consider and vote upon a proposal to approve and adopt the Agreement and Plan of Merger and Reorganization, dated November 3, 2008, by and among Replidyne, Responder Merger Sub, Inc., and CSI and the merger contemplated therein, as described in the attached proxy statement/prospectus.

 

2. To authorize an increase in the number of shares of CSI common stock reserved under CSI’s 2007 Equity Incentive Plan from 3,379,397 to 3,879,397.

 

3. To consider and vote upon an adjournment of the special meeting, if necessary, if a quorum is present, to solicit additional proxies if there are not sufficient votes in favor of CSI Proposal No. 1 or 2.

 

4. To transact such other business as may properly come before the special meeting or any adjournment or postponement thereof.

 

The board of directors of CSI has fixed January 26, 2009 as the record date for the determination of stockholders entitled to notice of, and to vote at, the special meeting and any adjournment or postponement thereof. Only holders of record of shares of CSI common stock or preferred stock at the close of business on the record date are entitled to notice of, and to vote at, the special meeting. At the close of business on the record date, CSI had           shares of common stock,          shares of Series A convertible preferred stock,           shares of Series A-1 convertible preferred stock and           shares of Series B convertible preferred stock outstanding and entitled to vote. Each holder of CSI preferred stock is entitled to such number of votes per share on each proposal to be voted upon as shall equal the number of shares of common stock into which each share of the preferred stock is then convertible, and in the event each share of the preferred stock is convertible into a number of shares of common stock including a fraction, each holder shall be entitled to vote the sum of fractions of a share to which the holder is entitled, rounded down to the nearest whole number. As of the record date, each share of Series A convertible preferred stock was convertible into 1.01 shares of common stock, each share of Series A-1 convertible preferred stock was convertible into 1.03 shares of common stock, and each share of Series B convertible preferred stock was convertible into 1.01 shares of common stock.

 

Your vote is important. The affirmative vote of (i) the holders of a majority of the voting power of CSI common stock and preferred stock outstanding on the record date, voting as a single class on an as-converted to common stock basis, and (ii) a majority of the shares of CSI preferred stock outstanding on the record date, voting as a single class on an as-converted to common stock basis and including the shares of CSI preferred stock held by affiliates of Easton Capital Investment Group and Maverick Capital, Ltd., is required for approval of CSI Proposal No. 1. The affirmative vote of the holders of a majority of the voting power of CSI common stock and preferred stock, voting as a single class on an as-converted to common stock basis, casting votes in person or by proxy at the CSI special meeting is required for approval of CSI Proposal Nos. 2 and 3. Even if you plan to attend the special meeting in person, we request that you sign and return the enclosed proxy and thus ensure that your shares will be represented at the special meeting if you are unable to attend. If you sign, date and mail your proxy card without indicating how you wish to vote, your proxy will be counted as a vote in favor of CSI Proposal Nos. 1, 2 and 3. If you fail to return your proxy card, the effect will be that your shares will not be counted for purposes of determining whether a quorum is present at the special meeting. You may revoke your proxy in the manner described in the proxy statement/prospectus

before it has been voted at the special meeting. If you decide to attend the CSI special meeting, you may withdraw your proxy and vote in person.

 

By Order of the Board of Directors,

 

James E. Flaherty

Secretary

 

St. Paul, Minnesota

          , 2009

 

THE CSI BOARD OF DIRECTORS HAS DETERMINED AND BELIEVES THAT EACH OF THE CSI PROPOSALS OUTLINED ABOVE IS ADVISABLE, AND IN THE BEST INTERESTS OF, CSI AND ITS STOCKHOLDERS AND HAS APPROVED EACH SUCH PROPOSAL. THE CSI BOARD OF DIRECTORS RECOMMENDS THAT CSI STOCKHOLDERS VOTE “FOR” EACH SUCH PROPOSAL.

 

 

TABLE OF CONTENTS

 

 

The following section provides answers to frequently asked questions about the merger and the effect of the merger on holders of Replidyne common stock and CSI common stock and preferred stock, the Replidyne special meeting and the CSI special meeting. This section, however, only provides summary information. Replidyne and CSI urge you to read carefully the remainder of this proxy statement/prospectus, including the annexes to this proxy statement/prospectus, because the information in this section does not provide all the information that might be important to you regarding the merger and the other matters being considered at the Replidyne special meeting and the CSI special meeting.

 

As used in this proxy statement/prospectus, references to “Replidyne” refer collectively to Replidyne, Inc. and all of its subsidiaries unless the context requires otherwise, references to “CSI” refer to Cardiovascular Systems, Inc. and all of its subsidiaries unless the context requires otherwise, and references to the “combined company” refer to Replidyne following the proposed transaction described in this proxy statement/prospectus.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Replidyne, Inc.
Attn: Investor Relations
1450 Infinite Drive
Louisville, CO 80027
(303) 996-5500

 

 

Cardiovascular Systems, Inc.
Attn: Investor Relations
651 Campus Drive
St. Paul, MN 55112
(651) 259-2800

 

SUMMARY

	•	Highly differentiated product.  The Diamondback 360° Orbital Atherectomy System has received FDA clearance. Replidyne and CSI also believe that the Diamondback 360° has features that differentiate it from other FDA approved or cleared minimally invasive atherectomy devices. CSI’s revenues in the four fiscal quarters since the launch of the product and the high reorder rate among its initial customers demonstrate CSI’s ability to retain its customer base.
	•	Financial resources of the combined company.  CSI believes that Replidyne’s projected available cash at closing, together with CSI’s other cash resources, will be sufficient to fund CSI’s currently projected operating requirements for the foreseeable future.
	•	Large underserved PAD market opportunity.  PAD is a circulatory problem in which plaque deposits build up on the walls of arteries, reducing blood flow to the limbs. As cited by the authors of the PARTNERS study published in the Journal of the American Medical Association in 2001, PAD affects approximately eight to 12 million people in the United States. Despite the severity of PAD, it remains relatively under diagnosed. Recent emphasis on PAD education from medical associations, insurance companies and other groups, coupled with publications in medical journals, is increasing physician and patient awareness of PAD risk factors, symptoms and treatment options.
	•	Proven management team with deep PAD experience.  CSI’s management team has a background in developing and marketing PAD devices and has demonstrated the ability to successfully execute CSI’s growth strategy.

	•	the strategic alternatives available to Replidyne, including a transaction with another potential partner, liquidation of the company and the continued development of its former product candidates;
	•	the failure of Replidyne’s lead product candidate, faropenem medoxomil, to receive approval from the FDA for its new drug application;
	•	the early stage of development of Replidyne’s research pipeline programs and the capital that would be required to achieve regulatory approval to complete the development of those programs; and
	•	the recent volatility in the public markets that, when combined with Replidyne’s net cash position and its public listing, could allow Replidyne to obtain favorable terms in a “reverse merger” transaction.

	•	the expectation that the merger would be a more time- and cost-effective means to access capital than other options considered, including an initial public offering or an additional round of private equity financing;
	•	the judgment of CSI’s board of directors that the merger is the best alternative available to CSI and its stockholders; and
	•	the likelihood that the merger will be consummated on a timely basis.

								Replidyne Securityholder				CSI Securityholder
								Ownership Percentage				Ownership Percentage
								in the				in the
Net Assets				Conversion Factor				Combined Company				Combined Company
$	41,000,000				6.304				17.4%				82.6%
	40,000,000				6.460				17.0%				83.0%
	37,000,000				6.460				17.0%				83.0%
	36,000,000				6.624				16.7%				83.3%
	35,000,000				6.797				16.3%				83.7%
	34,000,000				6.979				15.9%				84.1%
	33,000,000				7.172				15.6%				84.4%

	•	stockholders of CSI must have approved and adopted the merger agreement and the merger contemplated therein, and stockholders of Replidyne must have approved the issuance of Replidyne common stock in the merger and the amendment to the restated certificate of incorporation of Replidyne;
	•	no temporary restraining order, preliminary or permanent injunction or other order preventing the consummation of the merger shall have been issued by any court of competent jurisdiction or other governmental body and remain in effect, and there shall not be any legal requirement enacted or deemed applicable to the merger that makes consummation of the merger illegal;
	•	the initial listing application on the Nasdaq Global Market shall have been conditionally approved, and the shares of Replidyne common stock to be issued in the merger shall be conditionally approved for listing on the Nasdaq Global Market, both subject only to the completion of the closing and completion by Replidyne of any reverse stock split required by Nasdaq; and
	•	since the signing of the merger agreement, there shall not have occurred and be continuing any material adverse effect for either party.

	•	solicit, initiate, knowingly encourage, induce or facilitate the making, submission or announcement of any “acquisition proposal” or “acquisition inquiry,” each as defined in the merger agreement and explained in this proxy statement/prospectus, or take any action that would reasonably be expected to lead to an acquisition proposal or acquisition inquiry;

	•	furnish any nonpublic information regarding CSI or Replidyne, as the case may be, to any person in connection with or in response to an acquisition proposal or acquisition inquiry;
	•	engage in discussions or negotiations with any person with respect to any acquisition proposal or acquisition inquiry;
	•	approve, endorse or recommend any acquisition proposal; or
	•	execute or enter into any letter of intent or similar document or any contract contemplating or otherwise relating to any acquisition transaction.

	•	neither such party nor any representative of such party has breached the no solicitation provisions of the merger agreement described above with respect to that particular superior offer or acquisition proposal;
	•	the board of directors of such party concludes in good faith, based on the advice of outside legal counsel, that such action is required in order for such party’s board of directors to comply with its fiduciary obligations to such party’s stockholders under applicable legal requirements;
	•	at least three business days prior to furnishing any such information to, or entering into discussions with, such person, such party gives the other party written notice of the identity of such person and of such party’s intention to furnish information to, or enter into discussions with, such person;
	•	such party receives from such person an executed confidentiality agreement containing provisions (including nondisclosure provisions, use restrictions, non-solicitation provisions, no hire provisions and “standstill” provisions) at least as favorable to such party as those contained in the confidentiality agreement previously entered into between Replidyne and CSI; and
	•	at least three business days prior to furnishing any such nonpublic information to such person, such party furnishes such information to the other party (to the extent such nonpublic information has not been previously furnished by such party to the other party).

	•	by mutual written consent of Replidyne and CSI, duly authorized by their respective boards of directors;
	•	subject to certain limitations, by either Replidyne or CSI if the merger shall not have been consummated by April 30, 2009;
	•	by either Replidyne or CSI if a court of competent jurisdiction or other governmental body shall have issued a final and nonappealable order, or shall have taken any other final and nonappealable action, having the effect of permanently restraining, enjoining or otherwise prohibiting the consummation of the merger;
	•	by either Replidyne or CSI if Replidyne stockholders fail to approve either the amendment to Replidyne’s restated certificate of incorporation or the issuance of the Replidyne common stock pursuant to the merger agreement at the special meeting;
	•	by either Replidyne or CSI if CSI stockholders fail to approve the adoption of the merger agreement at the special meeting;

	•	by either Replidyne or CSI if (i) the Replidyne board of directors has withheld, withdrawn, amended or modified its recommendation because it has determined in good faith, based on the advice of its outside legal counsel, that such action is required in order for the Replidyne board of directors to comply with its fiduciary obligations to Replidyne stockholders under applicable legal requirements, or (ii) Replidyne enters into a letter of intent, memorandum of understanding or definitive agreement with respect to a superior offer;
	•	by either Replidyne or CSI if (i) the CSI board of directors has withheld, withdrawn, amended or modified its recommendation because it has determined in good faith, based on the advice of its outside legal counsel, that such action is required in order for the CSI board of directors to comply with its fiduciary obligations to CSI stockholders under applicable legal requirements, or (ii) CSI enters into a letter of intent, memorandum of understanding or definitive agreement with respect to a superior offer; or
	•	subject to certain limitations, by either party in the event of any inaccuracy of representations and warranties of the other party having a material adverse effect or a material breach by the other party of its obligations or covenants under the merger agreement.

	•	the merger agreement is terminated by Replidyne or CSI if (i) the Replidyne board of directors has withheld, withdrawn, amended or modified its recommendation because it has determined in good faith, based on the advice of its outside legal counsel, that such action is required in order for the Replidyne board of directors to comply with its fiduciary obligations to Replidyne stockholders under applicable legal requirements, or (ii) Replidyne enters into a letter of intent, memorandum of understanding or definitive agreement with respect to a superior offer; or
	•	the merger agreement is terminated by Replidyne or CSI if the stockholders of Replidyne do not approve either the amendment to Replidyne’s restated certificate of incorporation or the issuance of Replidyne common stock at the Replidyne special meeting of stockholders, and both of the following conditions are met:

	•	prior to the Replidyne special meeting of stockholders, an acquisition proposal with respect to Replidyne has been publicly made and not withdrawn; and
	•	within twelve months of the termination of the merger agreement, Replidyne enters into any agreement for an acquisition transaction contemplated by such acquisition proposal or consummates an acquisition transaction contemplated by such acquisition proposal.

	•	the merger agreement is terminated by Replidyne or CSI if (i) the CSI board of directors has withheld, withdrawn, amended or modified its recommendation because it has determined in good faith, based on the advice of its outside legal counsel, that such action is required in order for the CSI board of directors to comply with its fiduciary obligations to CSI stockholders under applicable legal requirements, or (ii) CSI enters into a letter of intent, memorandum of understanding or definitive agreement with respect to a superior offer; or
	•	the merger agreement is terminated by Replidyne or CSI if the stockholders of CSI do not approve the adoption of the merger agreement (including the consummation of the merger) at the CSI special meeting of stockholders, and all of the following conditions are met:

	•	prior to the CSI special meeting of stockholders, an acquisition proposal with respect to CSI has been publicly made and not withdrawn; and

	•	within twelve months of the termination of the merger agreement, CSI enters into any agreement for an acquisition transaction contemplated by such acquisition proposal or consummates an acquisition transaction contemplated by such acquisition proposal.

Name		Position in the Combined Company
David L. Martin		President and Chief Executive Officer
Laurence L. Betterley		Chief Financial Officer
James E. Flaherty		Chief Administrative Officer and Secretary
John Borrell		Vice President of Sales
Brian Doughty		Vice President of Marketing
Robert J. Thatcher		Executive Vice President
Paul Tyska		Vice President of Business Development
Paul Koehn		Vice President of Manufacturing

 

SELECTED HISTORICAL AND UNAUDITED PRO FORMA CONDENSED
COMBINED FINANCIAL DATA

 

Selected Historical Financial Data of Replidyne

																						Nine Months Ended
		Years Ended December 31,																				September 30,
		2003				2004				2005				2006(1)				2007(1)				2007(1)				2008(1)
		(In thousands, except per share amounts)
																						(unaudited)				(unaudited)
Statement of Operations Data:
Revenue		$	726			$	834			$	441			$	15,988			$	58,571			$	58,571			$	—
Costs and expenses
Research and development			12,331				16,282				29,180				38,295				43,313				28,462				26,842
Sales, general and administrative			2,155				2,994				5,329				12,187				13,020				9,803				12,290
Total costs and expenses			14,486				19,276				34,509				50,482				56,333				38,265				39,132
Income (loss) from operations			(13,760	)			(18,442	)			(34,068	)			(34,494	)			2,238				20,306				(39,132	)
Other income (expense), net			(190	)			(797	)			399				5,245				5,454				4,329				1,529
Net income (loss)			(13,950	)			(19,239	)			(33,669	)			(29,249	)			7,692				24,635				(37,603	)
Preferred stock dividends and accretion			(1,294	)			(3,560	)			(7,191	)			(5,391	)			—				—				—
Net income (loss) attributable to common stockholders		$	(15,244	)		$	(22,799	)		$	(40,860	)		$	(34,640	)		$	7,692			$	24,635			$	(37,603	)
Basic net income (loss) attributable to common stockholders per share		$	(20.82	)		$	(30.55	)		$	(39.20	)		$	(2.49	)		$	0.29			$	0.92			$	(1.39	)
Diluted net income (loss) attributable to common stockholders per share		$	(20.82	)		$	(30.55	)		$	(39.20	)		$	(2.49	)		$	0.28			$	0.89			$	(1.39	)
Weighted average shares used in computing net (income) loss per share:
Basic			732				746				1,042				13,908				26,730				26,696				27,049
Diluted			732				746				1,042				13,908				27,666				27,666				27,049

(1)		Costs and expenses for periods subsequent to December 31, 2005 include stock-based compensation expense in accordance with SFAS No. 123(R), Share-Based Payment, which was adopted by Replidyne on January 1, 2006.

																						As of
		As of December 31,																				September 30,
		2003				2004				2005				2006				2007				2008
		(In thousands)
																						(unaudited)
Consolidated Balance Sheet Data:
Cash, cash equivalents and short-term investments		$	692			$	27,018			$	59,420			$	125,567			$	90,266			$	50,591
Working capital			(1,657	)			24,409				50,755				68,147				80,440				45,034
Total assets			4,169				30,067				63,579				135,561				94,690				52,112
Long-term debt, net of current portion and discount			1,208				84				—				—				—				—
Accumulated deficit			(20,105	)			(42,235	)			(83,107	)			(116,980	)			(109,288	)			(146,891	)
Preferred stock			20,058				69,447				136,815				—				—				—
Total shareholders’ equity (deficit)			(20,115	)			(42,202	)			(82,632	)			71,372				82,404				45,237

 

Selected Historical Financial Data of CSI

																						Three Months Ended
		Years Ended June 30,																				September 30,
		2004				2005				2006				2007(1)				2008(1)				2007(1)				2008(1)
		(In thousands, except share and per share amounts)
Consolidated Statements of Operations Data:
Revenues		$	—			$	—			$	—			$	—			$	22,177			$	—			$	11,646
Cost of goods sold			—				—				—				—				8,927				(539	)			3,881
Gross profit			—				—				—				—				13,250				(539	)			7,765
Expenses(1):
Selling, general and administrative			984				1,177				1,735				6,691				35,326				3,552				16,424
Research and development			3,246				2,371				3,168				8,446				16,068				3,328				4,955
Total expenses			4,230				3,548				4,903				15,137				51,394				6,880				21,379
Loss from operations			(4,230	)			(3,548	)			(4,903	)			(15,137	)			(38,144	)			(7,419	)			(13,614	)
Other income (expense):
Interest expense			—				—				(48	)			(1,340	)			(923	)			(300	)			(227	)
Interest income			18				37				56				881				1,167				278				142
Impairment on investments			—				—				—				—				(1,267	)			—				—
Total other income (expense)			18				37				8				(459	)			(1,023	)			(22	)			(85	)
Net loss			(4,212	)			(3,511	)			(4,895	)			(15,596	)			(39,167	)			(7,441	)			(13,699	)
Accretion of redeemable convertible preferred stock(2)			—				—				—				(16,835	)			(19,422	)			(4,853	)			—
Net loss available to common shareholders		$	(4,212	)		$	(3,511	)		$	(4,895	)		$	(32,431	)		$	(58,589	)		$	(12,294	)		$	(13,699	)
Loss per common share:
Basic and diluted(3)		$	(0.78	)		$	(0.61	)		$	(0.79	)		$	(5.22	)		$	(8.57	)		$	(1.95	)		$	(1.78	)
Weighted average common shares used in computation:
Basic and diluted(3)			5,375,795				5,779,942				6,183,715				6,214,820				6,835,126				6,291,512				7,692,248

(1)		Operating expenses in the years ended June 30, 2007 and 2008 and three months ended September 30, 2007 and 2008 include stock-based compensation expense as a result of the adoption of SFAS No. 123(R), Share-Based Payment on July 1, 2006, as follows (in thousands):

										Three Months Ended
		Years Ended June 30,								September 30,
		2007				2008				2007				2008
Cost of goods sold		$	—			$	232			$	—			$	176
Selling, general and administrative			327				6,852				277				1,384
Research and development			63				297				73				112

(2)		See Notes 1 and 10 of the notes to CSI’s consolidated financial statements included elsewhere in this proxy statement/prospectus for a discussion of the accretion of redeemable convertible preferred stock.
(3)		See Note 12 of the notes to CSI’s consolidated financial statements included elsewhere in this proxy statement/prospectus for a description of the method used to compute basic and diluted net loss per common share and basic and diluted weighted-average number of shares used in per common share calculations.

																						As of
		As of June 30,																				September 30,
		2004				2005				2006				2007				2008				2008
		(In thousands)
Consolidated Balance Sheet Data:
Cash and cash equivalents		$	3,144			$	1,780			$	1,554			$	7,908			$	7,595			$	14,727
Short-term investments			—				—				—				11,615				—				—
Working capital(1)			2,868				1,349				(1,240	)			18,171				(3,118	)			(11,144	)
Total current assets			3,166				2,116				2,424				20,828				18,204				24,914
Total assets			4,031				2,874				3,296				22,025				41,958				48,612
Redeemable convertible preferred stock warrants			—				—				—				3,094				3,986				4,047
Total liabilities			298				767				3,723				5,830				25,408				42,605
Redeemable convertible preferred stock			—				—				—				48,498				98,242				98,242
Total shareholders’ (deficiency) equity			3,733				2,107				(427	)			(32,303	)			(81,692	)			(92,235	)

(1)		Working capital is calculated as total current assets less total current liabilities as of the balance sheet date indicated.

		September 30,				December 31,				March 31,				June 30,				September 30,				December 31,				March 31,				June 30,				September 30,
		2006				2006				2007				2007				2007				2007				2008				2008				2008
		(In thousands)
Consolidated Statements of Operations Data:
Revenues		$	—			$	—			$	—			$	—			$	—			$	4,631			$	7,654			$	9,892			$	11,646
Gross profit (loss)			—				—				—				—				(539	)			2,438				5,142				6,209				7,765
Loss from operations			(1,571	)			(2,964	)			(3,984	)			(6,618	)			(7,419	)			(10,187	)			(9,291	)			(11,247	)			(13,614	)
Net loss			(1,328	)			(3,139	)			(4,187	)			(6,942	)			(7,441	)			(9,768	)			(10,611	)			(11,347	)			(13,699	)
Net loss available to common shareholders(1)			(5,207	)			(7,266	)			(8,584	)			(11,374	)			(12,294	)			(10,121	)			(24,827	)			(11,347	)			(13,699	)

(1)		Net loss available to common shareholders includes accretion of redeemable convertible preferred stock.

 

Selected Unaudited Pro Forma Condensed Combined Financial Data of Replidyne and CSI

	•	net cash used in Replidyne’s operations between the pro forma balance sheet date of September 30, 2008 and the closing of the merger;
	•	the timing of completion of the merger;
	•	Replidyne’s net assets as calculated pursuant to the merger agreement, which will partially determine the actual number of shares of Replidyne’s common stock to be issued pursuant to the merger; and
	•	other changes in Replidyne’s net assets that may occur prior to completion of the merger, which could cause material differences in the information presented below.

						Three Months
		Year Ended				Ended
		June 30,				September 30,
		2008				2008
		(In thousands, except per share amounts)
Unaudited Pro Forma Condensed Combined Statement of Operations Data
Total Revenue		$	22,177			$	11,646
Selling, general and administrative expenses			47,810				21,317
Research and development expenses			62,610				9,675
Loss from operations			(97,170	)			(23,227	)
Net loss			(93,824	)			(22,775	)
Basic and diluted net loss per share			(0.70	)			(0.16	)
		September 30,
		2008
		(In thousands)
Unaudited Pro Forma Condensed Combined Balance Sheet Data
Cash and cash equivalents		$	46,786
Working capital			26,090
Total assets			100,521
Total liabilities			53,233
Total stockholders’ equity			47,288

 

Comparative Historical and Unaudited Pro Forma Per Share Data

						Three Months
		Year Ended				Ended
		June 30,				September 30,
		2008				2008
CSI Historical Common Share Data:
Basic and diluted net loss per share		$	(8.57	)		$	(1.78	)
Book value per share as of the period end			(10.78	)			(11.93	)
Replidyne Historical Common Share Data:
Basic and diluted net loss per share		$	(2.10	)		$	(0.37	)
Book value per share as of the period end			2.02				1.67
Combined Company Pro Forma Per Common Share Data:
Basic and diluted net loss per share		$	(0.70	)		$	(0.16	)
Book value per share as of the period end			N/A				0.22

 

MARKET PRICE AND DIVIDEND INFORMATION

						Common Stock
						High				Low
Fiscal Year Ended December 31, 2008
First quarter						$	3.10			$	1.29
Second quarter							1.90				1.25
Third quarter							1.43				1.16
Fourth quarter							1.27				0.28
Fiscal Year Ended December 31, 2007
First quarter						$	6.28			$	4.28
Second quarter							6.07				5.10
Third quarter							7.50				5.23
Fourth quarter							6.66				3.05

 

The combined company will be faced with a market environment that cannot be predicted and that involves significant risks, many of which will be beyond its control. In addition to the other information contained in this proxy statement/prospectus, you should carefully consider the material risks described below before deciding how to vote your shares of Replidyne common stock or CSI capital stock.

 

If any of the events described in “Risks Relating to CSI and the Combined Company” occur, those events could cause the potential benefits of the merger not to be realized.

 

Following the effective time of the merger, current CSI officers and directors will direct the business and operations of the combined company. Additionally, CSI’s business is expected to constitute all of the business of the combined company following the merger. As a result, the risks described below in the section entitled “Risks Relating to CSI and the Combined Company” beginning on page 24 are among the most significant risks to the combined company if the merger is completed. To the extent any of the events in the risks described below in the section entitled “Risks Relating to CSI and the Combined Company” occur, those events could cause the market price of the combined company’s common stock to decline.

 

In the event that Replidyne’s level of net assets at the effective time of the merger, as calculated pursuant to the merger agreement, is lower than $35.0 million, Replidyne stockholders will hold a smaller percentage ownership of Replidyne following the consummation of the merger than is currently anticipated and the combined company will have less working capital for future operations.

 

Subject to the terms of the merger agreement with CSI, at the effective time of the merger, each share of CSI common stock issued and outstanding immediately prior to the merger will be canceled, extinguished and automatically converted into the right to receive that number of shares of Replidyne common stock as determined pursuant to the conversion factor described in the merger agreement. The conversion factor depends on Replidyne’s level of net assets as of the effective time of the merger. Under the merger agreement, Replidyne’s net assets is defined as Replidyne’s total current assets minus all of its liabilities and other outstanding and future obligations as of the effective time of the merger, subject to certain adjustments. Replidyne currently anticipates that its level of net assets as of the effective time of the merger will be between $35.0 and $37.0 million, which would result in Replidyne’s current stockholders, together with holders of its options and warrants, owning or having the right to acquire between 16.3% and 17.0% of the common stock of the combined company on a fully diluted basis as calculated in accordance with the merger agreement. However, if one or more of the following circumstances arise, Replidyne’s level of net assets may be lower than Replidyne expects and Replidyne stockholders would hold a smaller percentage ownership of the combined company following the consummation of the merger than is currently anticipated, thus making the merger less attractive to Replidyne stockholders:

 

 

In addition, if Replidyne’s net assets are lower than expected, the combined company will have less working capital for future operations, which could adversely affect the ability of the combined company to achieve its business plan.

 

The costs associated with the merger are difficult to estimate, may be higher than expected and may harm the financial results of the combined company.

 

Replidyne and CSI estimate that they will incur aggregate direct transaction costs of approximately $6.2 million associated with the merger, and additional costs associated with the commencement of CSI’s operation as a public company, which cannot be estimated accurately at this time. The costs associated with the merger may increase if any CSI stockholders elect to dissent from the merger and seek payment of the fair value of their shares as permitted by Minnesota law. If the total costs of the merger exceed Replidyne’s and CSI’s estimates, the combined company will have less working capital for future operations, which will adversely affect the ability of the combined company to achieve its business plan.

 

Nasdaq considers the anticipated merger a reverse merger and therefore requires CSI and Replidyne to submit a new listing application with respect to the combined company, which will require certain actions by CSI and Replidyne and may not be successful, which would result in you having difficulty selling your shares.

 

Nasdaq considers the merger proposed in this proxy statement/prospectus as a reverse merger and requires CSI and Replidyne to submit a new listing application with respect to the combined company. Nasdaq may not approve this new listing application. If this occurs and the merger is still consummated, you may have difficulty selling your shares.

 

Additionally, as part of the new listing application, CSI and Replidyne will be required to submit, among other things, a plan for the combined company to conduct a reverse stock split. A reverse stock split would increase the per share trading price by a yet undetermined multiple. The change in share price may affect the volatility and liquidity of the combined company’s stock, as well as the marketplace’s perception of the stock. As a result, the relative price of the combined company’s stock may decline and/or fluctuate more than in the past, and you may have trouble converting your investments in the combined company into cash effectively.

 

The market price of Replidyne common stock has fallen significantly since the public announcement of the proposed merger. If the merger is completed, the market price of the combined company’s common stock may decline further.

 

On November 3, 2008, the last day prior to the public announcement of the proposed merger, the closing price per share of Replidyne common stock as reported on The Nasdaq Global Market was $1.12. On          , 2009, the last practicable date before the printing of this proxy statement/prospectus, the closing price per share of Replidyne common stock as reported on The Nasdaq Global Market was $     , which represents a     % decrease from the closing price on November 3, 2008. This decrease may increase the risk that Replidyne would become subject to securities class action litigation, which could result in substantial costs and a delay in the completion of the merger. If the merger is completed, the market price of the combined company’s common stock may decline further for a number of reasons, including if:

 

 

Because the lack of a public market for CSI’s outstanding shares makes it difficult to evaluate the fairness of the merger, CSI stockholders may receive consideration in the merger that is greater than or less than the fair market value of the CSI shares.

 

The outstanding capital stock of CSI is privately held and is not traded in any public market. The lack of a public market makes it extremely difficult to determine the fair market value of CSI. Since the percentage of Replidyne’s equity to be issued to CSI stockholders was determined based on negotiations between the parties, it is possible that the value of the Replidyne common stock to be issued in connection with the merger will be greater than the fair market value of CSI. Alternatively, it is possible that the value of the shares of Replidyne common stock to be issued in connection with the merger will be less than the fair market value of CSI.

Replidyne and CSI executive officers and directors may have interests in the merger that are different from, or in addition to, those of Replidyne and CSI stockholders generally.

 

The executive officers and directors of Replidyne and CSI may have interests in the merger that are different from, or are in addition to, those of Replidyne and CSI stockholders generally. The directors of the combined company will consist of two directors from Replidyne’s board and eight directors from CSI’s board. Further, certain Replidyne executive officers will receive change in control payments in connection with the merger. See the sections entitled “Interests of Replidyne’s Executive Officers and Directors in the Merger” starting on page 66 and “Interests of CSI’s Executive Officers and Directors in the Merger” starting on page 70.

 

Replidyne and CSI may not be able to complete the merger or may elect to pursue a different strategic transaction, which may not occur on commercially reasonably terms or at all.

 

Neither Replidyne nor CSI can assure you that they will close the pending merger in a timely manner or at all. The merger agreement is subject to many closing conditions and termination rights, as set forth in more detail in “The Merger Agreement — Conditions to the Completion of the Merger” and “The Merger Agreement — Termination of the Merger Agreement” below. If Replidyne and CSI do not complete the pending merger, Replidyne’s and CSI’s board of directors may elect to attempt to complete a different strategic transaction. Attempting to complete a different strategic transaction would prove to be costly and time consuming, and neither Replidyne nor CSI can make any assurances that a future strategic transaction will occur on commercially reasonable terms or at all.

 

Failure to complete the merger could adversely affect Replidyne’s stock price and Replidyne’s and CSI’s future business and operations.

 

The merger is subject to the satisfaction of closing conditions, including approval by Replidyne and CSI stockholders, and neither Replidyne nor CSI can assure you that the merger will be completed. In the event that the merger is not completed, Replidyne and CSI may be subject to many significant costs, including legal, accounting and advisory fees related to the merger, which must be paid even if the merger is not completed, and the payment of a termination fee and certain expenses under certain circumstances. If the merger is not completed, the market price of Replidyne common stock could decline as a result. If the merger is not completed, CSI will need additional debt or equity financing to carry out its business plan and there is no assurance that such debt or equity financing will be available on acceptable terms or at all.

 

During the pendency of the merger, Replidyne and CSI may not be able to enter into a business combination with another party because of restrictions in the merger agreement.

 

The merger agreement restricts the ability of Replidyne and CSI to make acquisitions or complete other transactions. While the merger agreement is in effect, subject to limited exceptions, each party is prohibited from soliciting, initiating, encouraging or taking actions designed to facilitate any inquiries or the making of any proposal or offer that could lead to such party entering into certain extraordinary transactions with any third party, such as a sale of assets, an acquisition of common stock, a tender offer for capital stock or a merger or other business combination outside the ordinary course of business. Any such transactions could be favorable to Replidyne or CSI stockholders.

 

The merger may be completed even though material adverse changes may result from the announcement of the merger, industry-wide changes and other causes.

 

In general, either party can refuse to complete the merger if there is a material adverse change affecting the other party between November 3, 2008, the date of the merger agreement, and the closing of the merger. However, some types of changes do not permit either party to refuse to complete the merger, even if such changes would have a material adverse effect on Replidyne or CSI. If adverse changes occur but Replidyne and CSI must still complete the merger, the combined company’s stock price may suffer.

 

If the proposed merger with CSI is not consummated, Replidyne’s prospects will be materially and adversely affected and its stock price could decline.

 

Replidyne and CSI are targeting a closing of the merger in the first calendar quarter of 2009. If the merger agreement is terminated and Replidyne seeks another business combination, Replidyne may not be able to find a third party willing to provide equivalent or more attractive consideration than the consideration to be provided in the proposed merger with CSI. In such circumstances, Replidyne’s board of directors may elect to, among other things, take the steps necessary to liquidate Replidyne’s business and assets. In the case of a liquidation, the consideration that Replidyne might receive may be less attractive than the consideration to be received by it pursuant to the merger with CSI.

 

Replidyne no longer has any internal capabilities to develop its product candidates. Replidyne’s ability to increase stockholder value is dependent on Replidyne’s ability to successfully complete a strategic transaction or transactions for the sale of the company and the sale of Replidyne’s product development programs, which Replidyne may be unable to complete.

 

In August 2008, Replidyne commenced restructuring its operations to reduce its employee headcount to six employees by the end of October 2008. Replidyne suspended further development activities of REP3123, Replidyne’s investigational agent for the treatment of Clostridium difficile, or C. difficile, bacteria and C. difficile Infection, or CDI, and novel anti-infective compounds based on Replidyne’s DNA replication inhibition technology. Previously, Replidyne had restructured its operations in a number of actions announced in December 2007, April 2008 and June 2008 that included Replidyne’s decision to terminate its license with Asubio Pharma, Co., Ltd, or Asubio Pharma, for faropenem medoxomil and related contract manufacturing agreements for faropenem medoxomil, discontinue enrollment in Replidyne’s Phase III clinical trial of faropenem medoxomil for the treatment of acute exacerbations of chronic bronchitis and reduce employee headcount. Replidyne had previously devoted substantially all of its clinical development and research and development efforts and a material portion of its financial resources toward the development of faropenem medoxomil, REP3123, its DNA replication inhibition technologies and its other product candidates. Replidyne currently has no product candidates in clinical or pre-clinical development and has further reduced its employee headcount to three employees, all of whom are involved primarily in financial and administrative roles. Replidyne has entered into an agreement with Morgan Stanley to provide financial advisory services for Replidyne’s strategic alternatives process. Replidyne’s management has also devoted a substantial amount of time and effort to the strategic alternatives process. As a result of this process, Replidyne has entered into the merger agreement with CSI and continues to pursue the sale of its suspended REP3123 program and DNA replication inhibition technologies.

 

Consummation of the merger with CSI is subject to numerous conditions to closing, including approval from Replidyne stockholders and the stockholders of CSI, which approval cannot be assured. Further, Replidyne cannot predict whether its REP3123 program and/or DNA replication inhibition technologies can be sold on favorable terms or at all. Completing the merger with CSI and pursuing the sale of its REP3123 program and DNA replication inhibition technologies may require Replidyne to incur substantial additional costs. If Replidyne is unable to complete the merger, its business may be liquidated.

 

Replidyne may not be able to generate adequate proceeds or any proceeds from the sale of its REP3123 program and DNA replication inhibition technology.

 

Replidyne is pursuing the sale of its REP3123 program and DNA replication inhibition technology. Replidyne has solicited bids through provision of bid instruction letters to numerous parties. Replidyne’s Chief Scientific Officer is acting as the representative for a company in formation that has indicated an interest in acquiring and pursuing these programs. If Replidyne does not receive an acceptable bid for its REP3123 program or DNA replication inhibition technology, Replidyne may not be able to generate adequate proceeds or any proceeds from the sale of these programs. The failure to generate these proceeds would negatively impact the percentage of the combined company that Replidyne stockholders will hold following the merger with CSI. In particular, if Replidyne’s level of net assets at the effective time of the merger is lower than $35.0 million, Replidyne’s current

stockholders, together with holders of its options and warrants, will own or have the right to acquire less than 16.3% of the common stock of the combined company.

 

Replidyne has received a warning letter from the FDA for Replidyne’s NDA filed in December 2005 for faropenem medoxomil, Replidyne’s former product candidate. Failure to resolve the matters addressed in the warning letter could negatively impact Replidyne’s or a successor company’s ability to undertake clinical trials in the future or timely complete future IND and NDA submissions.

 

On January 22, 2008, Replidyne received a warning letter from the Division of Scientific Investigation of the FDA, or DSI, informing Replidyne of objectionable conditions found during the DSI’s investigation of Replidyne’s role as applicant for Replidyne’s new drug application, or NDA, for faropenem medoxomil. The FDA’s observations were based on its establishment inspection reports following on site inspections in conjunction with the FDA’s review of Replidyne’s NDA. Specifically, DSI cited that Replidyne failed to make available the underlying raw data from the investigation for the FDA’s audit and failed to provide the FDA adequate descriptions and analyses of any other data or information relevant to the evaluation of the safety and effectiveness of faropenem medoxomil obtained or otherwise received by Replidyne from any source derived from clinical investigations. The clinical trials that supported Replidyne’s NDA were conducted by Bayer as a previous licensee of faropenem medoxomil. In June 2008, DSI made further inquires of Replidyne related to Replidyne’s previous responses to their observations in the warning letter. In July 2008, Replidyne communicated to the FDA Replidyne’s decision to terminate Replidyne’s license for faropenem medoxomil with Asubio Pharma and withdrew the NDA from consideration by the FDA. Replidyne also informed DSI of these actions. In a communication dated July 22, 2008 the FDA advised Replidyne that since Replidyne has active Investigational New Drug applications, or INDs, and ongoing clinical trials, the issues raised in the warning letter remained open. Following receipt of this communication, Replidyne withdrew all of its open INDs that related to faropenem medoxomil and REP8839. If Replidyne is unable to sufficiently establish to the FDA that future clinical trials conducted by Replidyne, or potentially a successor company, would be in accordance with FDA regulations, Replidyne may be subject to enforcement action by the FDA including being subject to the FDA’s Application Integrity Policy. This policy would require third-party validation of the integrity of the raw data underlying any of Replidyne’s future filings to the FDA before those filings would be accepted for consideration. Such a requirement would be onerous and require significant additional time and expense for the clinical development and potential approval of any product candidates that Replidyne may wish to develop in the future. These requirements would make it difficult for Replidyne to attempt to restart the development of any of its former product candidates or commence the development of any new product candidates in the event that the merger with CSI is not completed. Further, Replidyne could be subject to additional actions from the FDA that may negatively impact Replidyne’s ability or the ability of a successor company to enter into clinical trials or submit an IND or NDA in the future.

 

Replidyne has incurred significant operating losses since inception and anticipates that it will incur continued losses for the foreseeable future.

 

Replidyne has experienced significant operating losses since its inception in December 2000. At September 30, 2008, Replidyne had an accumulated deficit of approximately $146.9 million. Replidyne has generated no revenue from product sales to date. Replidyne has funded its operations to date principally from the sale of its securities and payments by Forest Laboratories under Replidyne’s former collaboration agreement. As a result of the suspension of Replidyne’s clinical development of each of faropenem medoxomil, REP3123, its anti-bacterial agent addressing C. difficile bacteria and C. difficile-associated disease, and its DNA replication inhibition technology, Replidyne has no current prospect for near term revenues. Replidyne expects to continue to incur substantial additional operating losses during the period in which it seeks to consummate the proposed merger and pursue the sale of certain company assets including REP3123 and its DNA replication inhibition technology. Because of the numerous risks and uncertainties associated with closing the proposed merger with CSI and transactions related to the sale of Replidyne’s drug programs, Replidyne is unable to predict the extent of any future losses or the timeline for completing potential transactions.