Pfizer made the deal to acquire Encysive for $2.35 a share in February. The main prize is Encysive's pulmonary arterial hypertension (PAH) drug, Thelin, which is approved in the European Union and several other countries outside the U.S. Pfizer also is receiving the smaller company's earlier-stage pipeline, although I wouldn't be surprised to see Pfizer out-license or scrap these programs, since they'll be very expensive to develop.
At this price, Pfizer is getting a good deal on Thelin if it can get the drug approved in the U.S. and improve its label, like competitor Actelion is doing with its PAH drug, Tracleer. Don't get me wrong, though, this acquisition is also probably the best outcome for Encysive after it painted itself into a corner mismanaging its cash burn over the years.
Encysive's story is one often heard in the land of development-stage drugmakers -- and it's one that helps keep big pharma's pipelines stocked with cheap buyouts. It often takes only one misstep or delay for a cash-burning drugmaker to trip itself up and almost guarantees that shareholders will be forced to accept either a cheap buyout, huge amounts of dilutive financing, or an out-licensing of their top drug on unfavorable terms just to conserve cash.
Fool analyst Tim Beyers wrote an excellent article about former Rule Breakers pick Panacos Pharmaceuticals
I fully expect at least one of the unpalatable options I listed above to come to pass for Panacos, and an equally unsatisfying outcome for its shareholders. Even though Encysive will likely be just a footnote in the long history of Pfizer acquisitions, Encysive and Panacos present good case studies that all biotech and drug stock investors should remember.