Shares of Encysive Pharmaceuticals Inc. fell 43.4 percent after the Houston-based company received its third approvable letter for Thelin (sitaxsentan sodium) 100 mg tablets in the treatment of pulmonary arterial hypertension (PAH).

President and CEO Bruce Given said in a Monday morning conference call that the company is "moving to formal dispute resolution" with the FDA. At issue, according to Given, is whether the special protocol assessment (SPA) agreed upon by both parties for a Phase III trial called STRIDE-2 is binding.

The new drug application filing for Thelin was based on data from two randomized, placebo-controlled Phase III studies called STRIDE-1 and STRIDE-2. STRIDE-1 missed its primary endpoint of peak oxygen uptake but met a secondary endpoint of increasing the distance covered during a six-minute walk. The 100-mg dose of Thelin increased the distance to 65 meters (p=0.0002) from the 34 meters (p=0.0005) achieved with placebo, a difference of 31 meters. In STRIDE-2, which focused on the six-minute walk parameter and was designed under SPA, 100 mg of Thelin resulted in a statistically significant increase of 31.4 meters compared to placebo (p=0.03).

Based on those data, Encysive sought approval of Thelin, but received its first approvable letter in March 2006. Although the letter included a request for additional clinical trials, Given said at the time that he was hopeful additional trials actually would not be needed to address the agency's questions and concerns. He refused to specify the nature of those concerns, but analysts speculated about possible safety issues, and investors shaved nearly 50 percent off the company's market cap. (See BioWorld Today, March 28, 2006.)

Just two months later, Encysive submitted its complete response to the approvable letter. The response was based on existing data rather than new trials, and the FDA accepted the resubmission and set a two-month review cycle. But when the new PDUFA date came in July 2006, the agency issued a second approvable letter. Apparently, one "substantive" issue from the original approvable letter was still unresolved, and the FDA again offered the alternative of conducting additional clinical trials. Encysive's stock price fell another 40 percent, but Given said that the item in question was a "judgment call" and that he continued to "feel good" about avoiding additional clinical trials. (See BioWorld Today, July 26, 2006.)

In November, Encysive submitted a complete response to the second approvable letter, again without conducting new trials. The FDA requested additional data tables, which Encysive provided in December, and the resubmission clock started again, that time with a six-month review cycle that ended Friday.

As the new PDUFA date approached, shares of Encysive (NASDAQ:ENCY) climbed from a 52-week low of $2.56 in late March to open at $4.75 Friday morning. But investors seemed to lose faith near the end, pushing the stock down 11 percent to $4.10 ahead of the FDA's decision late Friday. The third approvable letter sent the shares into a tailspin on Monday, setting a new 52-week low: down $1.78 to close at $2.32.

The approvable letter stated that Thelin had shown some evidence of improving exercise tolerance in PAH but did not demonstrate the effectiveness needed for approval. Given confirmed that safety did not appear to be an issue and said the difference in opinion on efficacy was due to how the FDA conducted its analysis. He also assuaged analyst concerns regarding a particular trial site that had record-keeping issues, pointing out that STRIDE-2 was statistically significant with or without data from that site included.

"We believed it then, and remain convinced now, that STRIDE-2 had met the regulatory requirements for the SPA," Given said. "In our strong opinion, [the FDA's] analyses did not use the properly designed and executed STRIDE-2 SPA analysis plan and are thus post hoc. We believe the SPA process protects us from such post hoc analyses," he added.

Given declined to provide guidance as to how long the dispute resolution process may take, but did say that a "procedural issue" such as Encysive's potentially could be resolved relatively quickly, compared to a scientific issue. He also said that "there might well be a cause for action in federal court here."

In the approvable letter, the FDA encouraged Encysive for the third time to conduct additional clinical trials. Given indicated the company hasn't ruled out the possibility of such trials, but pointed to the financial hardships that would cause. Encysive already plans to review its strategic alternatives, which Given said he expects will involve restructuring.

As of June 15, Encysive had $54 million in cash and equivalents and another $10 million in restricted cash expected to become available July 1. The company reported a net loss of $29.9 million in the first quarter, but booked $1 million in European sales of Thelin. The drug gained approval in Europe in August 2006, in Australia in March 2007, and in Canada just last month. It was launched in the UK and Germany late last year and in Ireland and the Netherlands this year, and Encysive is planning additional launches this year in Spain, France and Italy.

Even if Thelin manages to achieve U.S. approval, the oral endothelin A receptor antagonist faces a competitive market in PAH. The endothelin receptor antagonist Tracleer (bosentan, Actelion Ltd.) generated 2006 sales of CHF 898.7 million (US$722.1 million), and a competing endothelin A receptor antagonist called Letairis (ambrisentan, Gilead Sciences Inc.) gained approval Friday. (See story this issue).