Encysive Pharmaceuticals (ENCY)

[Gd2Aussie3]

Encysive Invades Canada
By Brian Lawler June 1, 2007

Rule Breakers pick Encysive Pharmaceuticals' (Nasdaq: ENCY) quest to gain North American marketing approval for Thelin has received some good news.
The U.S. hasn't yet granted Thelin such approval, with an FDA decision expected in two weeks. But yesterday, Canada gave the drug a thumbs-up to be marketed for the treatment of pulmonary arterial hypertension (PAH).

Canada's population of only 33 million may seem like a small market for pharmaceuticals. But our northern neighbor is actually the world's eighth-largest such market, with sales exceeding $15 billion in U.S. dollars. Because drugmakers like Encysive generate income from high margins for their compounds, rather than a large number of prescriptions, they can still thrive in less populous countries.

Encysive estimates that PAH afflicts anywhere from 100,000 to 200,000 people in North America and Europe. If the two markets are roughly equal in size, and Canada accounts for approximately 10% of the North American market, that puts the drug's Canadian market potential at 5,000 to 10,000 patients. Thelin's actual potential is probably much smaller, though, considering that it's only indicated for patients in the more serious stages of the disease. Many of these patients are already on effective therapies, and probably won't switch to Thelin unless their current treatment fails.

Thelin has already been approved in the European Union, Australia, and other countries worldwide. Remember that the addition of Canada's stamp of approval will have no effect on the drug's odds with the FDA in the next two weeks.

It's also worth mentioning that even if Thelin fails to gain U.S. approval, Encysive's shares aren't necessarily overvalued, at a $275 million market cap. Whatever happens in the U.S., investors can at least be happy for a little while, as Encysive plants its flagship drug in Canada.
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G' day Mates,

Aussie