Investors in Encysive (NASDAQ:ENCY) over the past four months could probably use some Dramamine, given all the stock's ups and downs. First, the company's lead drug for pulmonary arterial hypertension, Thelin, got an approvable letter in March -- the Food and Drug Administration's way of saying "close, but no cigar" -- which caused the stock to drop more than 40%. Then the European Union's equivalent of the FDA recommended that Thelin be approved on that side of the pond, and the stock approached its pre-approvable-letter levels. Today, the company failed once more to gain U.S. approval for Thelin, and the stock is again down more than 40%.

Encysive's management tried its best to spin the approvable letter as a positive, saying that the FDA was contesting only one item in Thelin's NDA filing. We don't know what this item is, though, because management is being tight-lipped about it "for competitive reasons." Because of this huge unknown issue, I have a hard time feeling confident about Thelin's approval in the U.S. without more clinical trials.

In a conference call today, Encysive CEO Bruce Given said that his preliminary thoughts were that the item in contention with the FDA could be resolved without "new data collection or new analyses." I hope he's correct, because one more failure to get Thelin approved in the U.S. will be strike three, and will most certainly require lengthy new clinical trials.

This latest failure with Thelin makes some sort of dilutive financing later this year all but inevitable, since Encysive is keeping its expensive 50-person U.S. sales force. It will also have to pay for Thelin's rollout in Europe.

Encysive's news isn't all bad. With an expected EU approval of Thelin in the next couple of weeks, the company will potentially have EU revenues rolling in by the end of the year, and it should have more than a year's lead in that market over Myogen's (NASDAQ:MYOG) competing drug, Ambrisentan.

The company's next U.S. step for Thelin is to complete a response to the second FDA approvable letter, then wait again for another FDA decision. Last time, this process took four months to complete. With only one item left in contention, I'm expecting it will take a slightly shorter amount of time for another FDA response. For now, Encysive investors can only sit and wait.

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Fool contributor Brian Lawler owns shares of Encysive. He welcomes your feedback at The Fool has a disclosure policy.