Drugmakers with newly approved products are always exciting to follow, because the type of revenues and market share a drug will produce usually become apparent in the early stages of its sales. Drug developer Encysive Pharmaceuticals
Thelin was formally approved in August for marketing in Europe, and its commercial launch in the United Kingdom and Germany is expected this quarter. Encysive expects to eventually have about 35 sales reps for the drug; thus far, it's hired only a U.K. sales team, and it's in the process of hiring the German force.
Encysive's management said that the U.K. and Germany represent about 40% of its market in Europe, which will equate to something north of $200 million, considering that competing drug Tracleer did $500 million in sales worldwide (some of that in other places, including Asia) in 2005, and that Europe and the U.S. usually represent half of the revenues for these types of drugs.
Over the next year, Thelin should get a rollout in the rest of the EU, once Encysive is able to negotiate reimbursement rates for the drug in the individual countries.
As for Encysive's quarterly results, revenues came in at $6 million, up nicely from $3 million last year, thanks to increased royalty revenues from its other marketed drug, Argatroban. These increased royalties somewhat mitigated Encysive's higher spending from building up its European operations, but cash burn was still a hefty $25 million for the quarter, bringing Encysive's cash and equivalents down to roughly $50 million.
During the conference call today, Encysive executives gave a terse update on Thelin's status in the U.S., saying that they believe that the FDA "continues to express a willingness to try and find a resolution to the one outstanding item" from the drug's second approvable letter. They wouldn't give any guidance as to when another update would come, mentioning only that if they thought the only path forward for the drug was another clinical trial, they would tell investors so in the future.
With cash dwindling, some sort of dilutive financing is around the corner, even with the $75 million credit facility Encysive now has from Azimuth Capital. Investors always get worried when they hear the word "dilution," but in this case, it's a necessary aspect of bringing a drug to market. By the end of the fourth quarter, investors should have a much better idea about Thelin's status in the U.S. and its sales potential in Europe, so risk-averse investors may be best suited to wait for this update.
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