The FDA's expected clearance last week of Gilead Sciences Inc.'s Letairis (ambrisentan) for pulmonary arterial hypertension changed the face of the game for players in oral endothelin receptor antagonists (ETRAs) - and largely silenced, at least for now, rumblings about a potential takeover of Encysive Pharmaceuticals Inc.

On the same day as the good news came for Letairis, Encysive disclosed yet another approvable letter from the agency regarding its Thelin (sitaxsentan) for PAH. Encysive blew it by trying to handle its ongoing skirmish with the FDA quietly, said analyst Stephen Dunn with Dawson James.

The letter is "more of a reflection of the FDA being too stringent" on its statistical significance demands, in this instance, Dunn told BioWorld Financial Watch. "Be that as it may, it was incumbent on Encysive to maintain their time lead on the competition, and they did not," he said.

At one point, Thelin was a full year ahead of the Gilead compound, then owned by Myogen Inc.., Dunn noted, and said Encysive should have opened up and asked for an FDA advisory panel to review the situation after the second approvable letter. Analyst Andrew Fein with C.E. Unterberg, Towbin, dubbed the most recent chapter in Encysive's woes "Texas Chainsaw Massacre - Part 3."

Even in the past few months, the race was a tough one to call. Doctors who dined with Unterberg in May were jumping up and down about Thelin, while CIBC World Markets advised investors that ambrisentan would be the FDA's favored child. Gilead's shares hardly reacted to the Letairis news, but Encysive lost more than 43 percent of its stock value when the market heard word of the third approvable letter. (See BioWorld Financial Watch, May 28, 2007.)

Encysive President and CEO Bruce Given said the firm will enter dispute resolution to figure out whether the special protocol assessment agreed upon by the FDA for the Phase III trial called STRIDE-2 is binding, and to what degree. The new drug application filing for Thelin was based on data from STRIDE-2 and another randomized, placebo-controlled Phase III study called STRIDE-1.

Missing its primary endpoint of peak oxygen uptake, STRIDE-1 met the secondary endpoint of increasing the distance covered during a six-minute walk, also known as 6WMD. 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 6WMD parameter and was designed under the SPA, 100 mg of Thelin resulted in a statistically significant increase of 31.4 meters compared to placebo (p=0.03).

"What Encysive says to the FDA is, 'We hit the standard [6WMD endpoint in STRIDE-1, where it was secondary], which is what you approved Tracleer for,'" Dunn said, and the firm only missed the primary endpoint because the agency had raised the bar. Then, in STRIDE-2, 6WMD was the primary endpoint and Encysive hit it, but not to the satisfaction of FDA, which used a different method of analysis. Tracleer (bosentan) from Actelion Ltd., is the only other ETRA cleared for PAH, but has problems with liver toxicities.

Thelin's first approvable letter came last March; Encysive and the FDA have been going back and forth ever since, though not all investors had clarity on the hang-up until last week, when things seemed to become a little less cloudy, albeit only a little. The third letter urges Encysive to do another trial, using 6MWD as the primary rather than secondary endpoint, apparently seeking a higher level of statistical significance.

Encysive's Given said the difference in opinion between Encysive and the FDA boils down to the way the FDA sliced and diced the data, with the agency diverging from the plan outlined in the SPA agreement.

Compare Thelin's trial results with Letairis: In two Phase III studies, the 5-mg dose significantly increased the distance covered during the 6MWD test by a placebo-adjusted mean value of 31 meters (p=0.008) in one trial and 59 meters (p<0.001) in the other. For the 10-mg dose, which was tested only in one trial, the placebo-adjusted mean increase was 51 meters (p<0.001).

Letairis' once-daily dosing could provide an edge over the primary competitor Tracleer, dosed twice per day. Tracleer netted sales of CHF898.7 million (US$722.1 million) last year. "Most of the Street felt that ambrisentan was best in class, including myself, but there was value [for Encysive's Thelin] in being the first" on the market, Dunn said.

Gilead's mighty marketing machine will help Letairis stack up against Tracleer, too, though Actelion also has been gathering sales steam this year - and both could mean trouble for Thelin, if it reaches the market.

For Encysive, at least there's Europe. Thelin won EMEA approval last summer, and combined revenues from the UK and Germany totaled only about $1 million in the first quarter. The two countries are believed to make up about 40 percent of the European market, but Thelin is only starting to gain ground and the full potential "take" can't be seen yet. Thelin is priced in the neighborhood of Tracleer (rather than lower, as is customary for second comers), about $38,000 per year of therapy in Germany and about $33,000 in the UK.

Other PAH drugs include the PDE-5 inhibitor Revatio (sildenafil), Pfizer Inc.'s cousin to the erectile dysfunction drug Viagra, and prostacyclins such as Flolan (epoprostenol sodium) from GlaxoSmithKline plc, Ventavis (iloprost, also from Actelion), and Remodulin (treprostinil) from United Therapeutics Inc. The last, whose product also is approved in the EU, has found traction slow to achieve overseas, as some physicians balked at the pricing.

Dunn had been cautiously optimistic about Thelin, and wrote in a research report shortly before the latest approvable letter that Encysive had been "caught up in the FDA's continuing negative publicity surrounding drug safety," and the sticking point, in Dunn's view, likely was Thelin's known interaction with the clot-buster Coumadin (warfarin), "which all of our experts in the U.S. and Europe agreed was easily manageable."

Dunn found a good omen for Encysive in the FDA's decision in December to lift the clinical hold on Phase II trials with the company's second-generation ETRA, known as TBC3711, in the oral and intravenous forms. Thelin is 6,000 times more selective for endothelin-A than endothelin-B receptors, but TBC3711 is greater than 100,000 times more selective for A than B. Both versions of TBC3711 were stalled in March as the result of baseline abnormalities in one rat given the IV form of the drug - but the rat probably should have been excluded from the start, Dunn noted. But the third approvable letter, and the few details that emerged from it, caught Wall Street by surprise, he said.

Ahead of Thelin's third FDA glitch, Dunn was still open to the idea of an Encysive takeover, given the big buyouts in PAH last year, when Actelion took CoTherix Inc. for $420 million (a 72 percent premium), which gave Actelion the inhaled prostacyclin analog for PAH, Ventavis (iloprost), and Gilead bought Myogen for $2.5 billion (a 50 percent premium), which brought ambrisentan aboard.

Encysive remains the only small-cap, stand-alone player in the PAH space, Dunn pointed out, but the firm's charm has diminished markedly. "They do have an asset in that Thelin has been approved in six countries so far, with more to follow," he said. "Whether [a deal] would entail buying the whole company or they sell it to a royalty fund, I don't know."

Last week's developments also put the whole SPA procedure in the spotlight.

"I don't really know where the truth is, but if the FDA is analyzing [Thelin's data] in a way that's not in the SPA, then that is not legal," Dunn said. "It will come out, what the exact differences were." The questions involve whether the FDA has wiggle room in an SPA and, if so, how much.

Meanwhile, Encysive shareholders are unlikely to take a philosophical view of the problem. Dunn predicted lawsuits. "Absolutely," he said. "It's a matter of weeks."