How Encysive Botched the FDA Game

Stephen Brozak, a veteran biotechnology analyst at WBB Securities, can't figure out who's to blame.

"That's the problem," says Brozak, who has no position in Encysive or its competitors. "There's no standardized method of quantifying how certain drugs get approved and other drugs do not. [Still], I'm long past giving the FDA any benefit of a doubt."

Meanwhile, investors have given up on Encysive anyway. Through a massive selloff in recent weeks, they have driven the company's shares down about 60% to $1.68 -- lows unseen since Encysive lost ICOS as its partner four long years ago.

Warning Signs

In early 2005, Encysive's gamble on changing Thelin's endpoint looked like it could pay off big.

Notably, Stride II showed that Thelin significantly boosted six-minute-walk distances among PAH patients and also posed little threat to their livers, boasting a lower toxicity rate than placebo. With approval of Thelin looking almost imminent, Encysive's stock rocketed toward $12 a share.

Behind the scenes, however, concerns had started to surface. A warning letter issued by the FDA hinted at "numerous protocol deviations/violations" stretching back to the early days of Stride II. Specifically, the FDA complained that one of Thelin's clinical investigators had failed to properly manage his arm of the trial and, moreover, that by 2006 -- some three years after the agency's first site visit -- had yet to remedy the situation.