Encysive Stock Sinks After New of 'Incomplete' Response to FDA

Things aren't looking good for Encysive Pharmaceuticals (ENCY). I wrote about the company last Friday after their stock jumped on news they were restarting a Phase 2 clinical study on TCB3711. My suggestion then was this stock was still all about their response to a second approvable letter for Thelin, and adding to a short position on the price hike, while risky, might pay off.

Last week, the FDA informed Encysive that their response was incomplete. The stock dropped 7% to close just above $5.50 last Wednesday (20% off the high of $7 last Friday), putting the short position I suggested in the black.

I listened to Encysive CEO Bruce Given in the conference call that ENCY hosted on Thursday morning and was not impressed. While initial press releases stated the problems were just in formatting, specifically that the FDA wanted some of the data in tables, Dr. Given backed off from being so definite and said the deficiencies were "for the most part just reformatting". As well, while initial reports suggested Encysive would refile within the week, Dr. Given also equivocated on this, saying he had to speak to the department involved.

It's impossible to know for certain what this all means. What can be known is that any decision on whether the FDA accepts the resubmission will likely be pushed off until at least January or February. While the CEO didn't say "stay the course" at any point, his answers to questions seemed straight out of Donald Rumsfeld's playbook. Maybe I'm too suspicious, but I think there's more to the story than is being told: perhaps an "unknown unknown". So, while this remains highly speculative, and is based purely on intuition and in no way on science or fact, I continue to think this will go down further.

ENCY 1-yr chart: