Silence From Encysive

Investors fret over a big FDA decision due Friday.
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Encysive

(ENCY)

, expected to release big news today about its most promising drug, so far remains eerily silent instead.

After fielding two dreaded approvable letters from the Food and Drug Administration for Thelin, its new treatment for pulmonary arterial hypertension, Encysive should now learn whether it can finally start selling the drug here at home. The company has won approval of Thelin in smaller markets outside the U.S. already.

Experts felt mixed about Thelin's chances ahead of Friday's crucial decision. So did investors. Shares sank 50 cents to $4.10.

UBS analyst Graig Suvannavejh has long feared the worst. Given Encysive's recent setbacks, Suvannavejh warned last week that the company could face calls for new clinical trials going forward.

"Our main concern remains potential further delay," noted Suvannavejh, whose firm has investment banking ties to Encysive. Moreover, "even should Thelin get approved, we believe it faces considerable challenges competing against

Gilead's

(GILD) - Get Report

ambrisentan ... which, we believe, has a more competitive profile. This forms the basis of our Reduce 2 rating" on Encysive.

Suvannavejh values Encysive's stock at just $3 a share because of regulatory risks. The stock, which has nearly doubled in recent months on foreign market approvals, fell 2.2% to $4.50 as investors nervously awaited the FDA's ruling on Friday.

Suvannavejh, for one, favors Gilead instead. The company could win approval of its own PAH treatment -- viewed as a "best-in-class" treatment for the disease -- within a matter of days.

Rodman & Renshaw analyst Navdeep Jaikaria seems to understand his competitor's stand. Indeed, he foresees challenges for Encysive -- and better times for Gilead -- even if Thelin wins FDA approval this week.

"While a positive outcome for Thelin from the FDA is likely, we do not believe that Thelin will be able to garner a significant enough market share in what would be suddenly a crowded

drug class," writes Jaikaria, whose firm makes a market in Encysive's securities. "Thelin's data just does not stack up positively against ambrisentan's, which we expect will be the market leader" in the end.

Still, at least one Encysive fan remains decidedly upbeat. Late last month, as he awaited final word from the FDA, Punk Ziegel analyst Matthew Kaplan felt inclined to believe that his bullish stand on the company was about to finally pay off.

To be sure, Kaplan has been wrong before -- surprised by both FDA setbacks so far -- and cost investors plenty in the process. Still, just two weeks ago, Kaplan found himself celebrating a new foreign market opportunity for Thelin and predicting crucial U.S. approval once again.

By then, Thelin had scored regulatory blessings in Canada -- with a favorable label no less -- and both Australia and Europe as well.

"We are encouraged by the approval of Thelin by three independent, rigorous regulatory agencies," Kaplan wrote in late May, following the positive ruling in Canada . "And this increases our confidence Thelin will receive approval in the U.S." going forward.

Meanwhile, Kaplan has been touting Thelin's maker on the basis of its European opportunity alone. To date, he says, Thelin has captured 40% of European PAH patients who are seeking new treatment for their disorder. Thus, he predicts, Thelin could be generating $257 million in annual European revenue within a few short years.

Kaplan, for one, believes that a bigger company might pay Encysive as much as $11.45 a share for that opportunity. He personally values Encysive at $12 a share on the basis of its worldwide Thelin potential.

"We continue to believe the market potential for Thelin in Europe is not reflected in the company's current market cap," stressed Kaplan, whose firm seeks to do business with the companies it covers. "Additionally, the market is currently awarding no value at all to Thelin in the U.S.

"Based on the strength of the product's therapeutic profile," he declared, "we believe this is a mistake."