investors are hoping to get some good news along with the bad.
All week, Wall Street has been waiting for the biotech to report that its new pulmonary arterial hypertension drug Thelin has finally won approval from the Food and Drug Administration. But late Thursday, the Bellaire, Texas, company shared some unexpected bad news instead.
Rather than announcing Thelin's approval, Encysive said the FDA has stalled clinical trials of TBC3711 -- a next-generation drug that's even more potent than Thelin -- due to problems in a recent animal study.
Specifically, Encysive said that human trials of TBC3711 have been placed on hold due to "an unusual finding following dosing with intravenous TBC3711 in a single rat that had displayed abnormalities at baseline." Encysive hopes to test both IV and oral versions of TBC3711 for the treatment of resistant hypertension.
Unlike PAH, which Thelin aims to address, resistant hypertension afflicts a large population of patients. Encysive has portrayed development of its new resistant hypertension drug as a "top priority" for the company.
The company's stock slid 17 cents Friday to $9.28.
Analysts have widely predicted that Encysive will secure approval for Thelin by Friday, the company's established target.
If so, Thelin will follow two other oral PAH treatments onto the market but with evidence of superior performance. Moreover, Thelin will enjoy a big head start against highly touted ambrisentan -- a new PAH drug under development by
-- that has already been deemed "best-in-class" by some.
Recent clinical trials have indicated that ambrisentan could prove safer than other PAH drugs that hit the market sooner. But some people believe that ambrisentan has yet to be tested long enough for problems -- particularly with liver toxicity -- to show up.
Encysive CEO Bruce Given suggested as much during a conference call last month.
"What I heard was that their study was only 12 weeks," Given said. "If they're only recording 12-week data ... it's kind of uninterpretable. Our experience with these Tracleer relapses is, again, many or most of them occur beyond 12 weeks."
Tracleer, manufactured by Swiss drug maker Actelion, ranks as the best-selling oral medication for PAH currently on the market. It generated $500 million in revenue for Actelion last year and, if the company achieves its goals, will become an even bigger seller going forward.
But Encysive has performed head-to-head studies showing that its own Thelin works better, with far less liver toxicity, than Tracleer does. Moreover, the company claims that it has already enjoyed a warm reception from managed care companies -- which foot the bill for expensive PAH treatments -- as a result.
"Usually, about halfway during the presentation, they sort of look up and say, 'We've been pounding the table for years to try to get Big Pharma to give us more comparative data. And here you guys are with an orphan drug, and you come (with) comparative data. This is what we want.'"
Apparently, many believe, regulators in the U.S. and Europe want exactly the same thing. And so far, they say, Encysive has emerged as the only company offering the kind of PAH drug comparisons those regulators are seeking.
For its part, Encysive believes that it has taken the right steps necessary to win approval of Thelin but has stopped short of guaranteeing victory nonetheless.
"While we continue to feel good about our prospects for FDA approval of Thelin, we have no way of knowing if and when we will receive that approval," CFO Gordon Busenbark told analysts during a conference call last month. "Similarly, we continue to feel good about our prospects for European approval of Thelin (in Europe) later this year. But we have the same issue in that there is no way of knowing if and when that approval will be forthcoming."
Version of Viagra
In the meantime,
has already rolled out an oral PAH treatment of its own.
Last year, Pfizer won approval to market Revatio -- which relies on the same active ingredient as its blockbuster Viagra -- for the treatment of PAH in both the U.S. and Europe. Since then, WR Hambrecht analyst Patrick Flanigan suggested this week, Revatio has started to win over physicians and could threaten Thelin's performance going forward.
"We find it unlikely that physicians will add Thelin to patients who are well controlled on Revatio," wrote Flanigan, who has a hold recommendation on Encysive's stock. So "absent Tracleer failures, Thelin is left to compete against Revatio for treatment-naive patients -- a population where physician response is overwhelmingly positive for Revatio use."
Actually, doctors could choose to use both drugs together instead. Actelion has laid out plans to test its own PAH drug with Revatio as an effective treatment for the disease.
Moreover, many believe, biotechs like Encysive and Myogen will spend far more energy marketing their PAH drugs than will pharmaceutical giants, like Pfizer, which have much broader focuses.
Certainly, Encysive has been gearing up for a big launch. The company has hired more than 50 veteran salespeople -- each at a cost of about $250,000 annually -- in anticipation of Thelin's regulatory approval.
The company has also indicated that Myogen's new drug could help, rather than hurt, its own marketing efforts in the end.
"Part of the reason this has been such a small market is because there hasn't been much promotional activity," Given said. "So part of what's going to make this market achieve the potential that we think the market has is the marketing and selling activity that's going to be thrown against this disease. And I think, assuming Myogen does come (out with ambrisentan) in the future, that is only going to help this market grow even faster."
Experts believe that PAH afflicts roughly 100,000 patients, most of them yet to be diagnosed. They have estimated that new treatments for the disease, like those being developed by both Encysive and Myogen, could easily sell for more than $30,000 a year.
Clearly, Encysive believes that its own efforts could finally start to pay off.
"While 2005 was our busiest year yet, we see no letup for 2006," Given said last month. "In fact, 2006 is shaping up to be the year where much hard work and investor patience is finally rewarded."