Bringing a new drug to market is an expensive enterprise, even for the largest drugmakers with billions of dollars in resources. For a tiny drug developer like Encysive Pharmaceuticals
Encysive released its fourth-quarter financial results last week, and it mentioned the dreaded "doubts about its ability to continue as a going concern" in its quarterly report. Investors need not worry -- there is little chance of the company going bankrupt, so this statement is really a matter of formality.
The more pressing concern is the huge amount of share dilution that will occur throughout the year as its $72 million cash hoard (as of March 1) is drained and its balance sheet worsens. For 2006, Encysive burned through more than $80 million in cash as it attempted to bring Thelin to market, unsuccessfully in the U.S. and successfully in the European Union.
Rolling out Thelin in the EU seems to be taking longer than expected because of pricing and reimbursement negotiations. Currently, it is only on the market in Germany and the United Kingdom, although a launch in the rest of the larger EU countries (like France and Spain) is expected later this year. Sales of Thelin were negligible in the EU, less than $1 million for the quarter, since Encysive just started marketing the drug in November.
With EU sales just ramping up, the pivotal event for this year will be the FDA's action June 15 on Encysive's approvable letter response. If Encysive is going to become profitable in the next two years, it needs Thelin on the market in the U.S., so this event will define its near-term future.