The Third Time Isn't the Charm for Encysive

So much for the saying, "third time's the charm" -- at least when it comes to Encysive Pharmaceuticals (Nasdaq: ENCY  ) . After the market closed on Friday, the drugmaker announced that the FDA had refused to approve its lead drug, Thelin, for marketing.

The approvable letter for the pulmonary arterial hypertension treatment marks the third time Thelin has failed to get full approval from the FDA. Encysive was a little more forthcoming with the reason for the approvable letter this time, stating that the FDA's concerns were that "Thelin did not demonstrate the evidence of effectiveness needed for approval." The FDA also "encouraged" another efficacy study of Thelin in order to gain full approval.

The FDA's concern about Thelin's efficacy is interesting, considering that the drug produced consistent statistically significant improvements in six-minute walking distance (the main efficacy measure) in all of its pivotal studies for nearly all doses.

Thelin outperformed the placebo in the six-minute walk measure by a wide margin in some studies, yet the FDA continued to be dissatisfied about the drug's efficacy. This gives more weight to the theory that the FDA was concerned about the accuracy of the Thelin data.

Encysive held a conference call this morning to discuss the path forward for Thelin in the U.S. The drugmaker is reviewing its strategic options and said "significant reductions in its infrastructure and workforce" may be necessary following this long setback for the drug. At the very least, it seems likely that Encysive will announce that it will be dissolving its U.S.-based sales force, which has been idle for more than a year.

The call for more efficacy data by the FDA likely means Encysive will run another 18-week phase 3 study with Thelin to assuage the FDA's concerns. The irony here is that had the company immediately set about initiating and enrolling such a study after the first approvable letter last year, this clinical trial would be nearing completion by now and Thelin would possibly be on the U.S. market in 2008. Instead, it is Gilead's (Nasdaq: GILD  ) Letairis, a drug Thelin used to have a one-year lead time on, that just launched.

Encysive is a Motley Fool Rule Breakers selection. You can check out all our recommendations -- as well as get access to our message boards and exclusive content -- with a 30-day free trial.

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

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