A California drug company that filed a lawsuit earlier this year accusing Salix Pharmaceuticals of breaching a collaboration agreement has now terminated that agreement.

San Francsico-based Napo Pharmaceuticals announced last week that it had terminated an agreement with Raleigh-based Salix to develop crofelemer as a treatment for chronic diarrhea in HIV/AIDS patients.

Napo informed Salix of its intent to terminate the agreement on Nov. 4.

In a regulatory filing, Salix said it believes the termination notice is connected to the lawsuit.

"We dispute Napo’s right to terminate our Collaboration Agreement as well as Napo’s related claims that we have breached the Collaboration Agreement," the company wrote. "We believe that neither has any merit."

Salix bought the rights to crofelemer for a $5 million licensing fee and future milestone payments in December 2008.