Reformatting Encysive

Well, it's only been a week, and there goes my prediction that drug developer Encysive Pharmaceuticals (Nasdaq: ENCY  ) would be one of the best-performing small-cap stocks for 2007. (Actually, since we're still in 2006, things are OK for my 2007 pick.) Shares slid 7% yesterday following the announcement that the FDA had rejected Encysive's approvable letter response for its drug candidate Thelin, since the agency wanted some of the data in the response presented in a different "tabular format." Huh?

In a conference call after the announcement was made, Encysive's management was unable to clarify whether the FDA had even begun to analyze the latest approvable letter response, or how far along in the review process it might have gotten. Initially, management said it would take a few days at most to get the newly formatted data back in to the FDA, but a little more than 12 hours after the announcement of the rejected response, Encysive announced the data had been sent in.

During the conference call, management was unclear about whether resubmitting the reformatted data would trigger a new 30-day response letter review period, or whether it would merely mean a few more days before the FDA could (potentially) accept Encysive's response and grant it a class 1 or 2 review.

If a class 1 or 2 review is forthcoming, that puts the PDUFA date (the day Thelin is, or isn't, given an approval for marketing) in early January or May. If this newly submitted data means a new 30-day wait until acceptance of the response letter, then push each of those possible timelines back a month.

The request for newly formatted data seems to speak more negatively about the FDA than Encysive. Why did the FDA have to wait 10 days after the 30-day response letter review period to tell Encysive that the company needed to submit an apparently easy-to-format data table? The FDA has had delays in accepting or denying other companies' review letters lately as well, so it seems like this latest delay is more an issue with the agency.

Some investors' true problem with Encysive is not the latest Thelin delay, but the company's coyness about the reasons for all the delays. After all, it's not the worries about redoing a table or chart that bother investors - it's that whatever is holding up approval of the drug could be more than an easily fixed issue, and Encysive's management isn't detailing the problem as thoroughly as it could. A simple explanation of the issue regarding the approvable letters could solve most investors' complaints, and make their investing decisions much easier.

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Fool contributor Brian Lawler does not own shares of any company mentioned in this article. The Fool has adisclosure policy.


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