Encysive: Despite TBC3711 Trial Resumption, Thelin is Key Factor

by Andrew Vaino



Encysive Pharmaceuticals (ENCY), a company I suggested as a highly speculative short, got some good news yesterday when the FDA gave them approval to restart a Phase 2 study on an endothelin receptor antagonist (TBC3711). The stock jumped over a dollar in pre-market trading: this doesn't help the short position I suggested.

My rationale for shorting ENCY was I felt their resubmission to the FDA for Thelin, which had already received two approvable letters, would not be accepted. I felt, and this is based more on intuition than science, that their CEO was being too circumspect in not detailing what exactly the FDA's issue of concern with Thelin was. I did write that this was only a guess.

Now, Encysive filed their response to the FDA on Novermber 2nd. The FDA informed them they would get a reply within approximately 30 days. So far there has been no word. While resumption of the clinical trial for TBC3711 is positive for the company, I still think the biggest factor is Thelin. So, while the short position I suggested (@$5.76) is bleeding, I still think Thelin makes or breaks the company. This is now much riskier, so I would suggest an order to cover at $7 in case the stock goes up further. A straddle at 7.5 is also a safe play. Myself, I picked up some 7.5 puts. Again, this is pure speculation.

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