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Encysive Pharma Shares Down After Rival Gets FDA OK

AP
Monday, 18 Jun 2007 | 10:28 AM ET

Encysive Pharmaceutical shares fell sharply Monday after rival Gilead Sciences recieved Food and Drug Administration approval for Letairis, a treatment for pulmonary arterial hypertension.

On Friday, Encycisive received its third approvable letter from the Food and Drug Administration for Thelin, a treatment for pulmonary arterial hypertension. The FDA said Encysive's program for the treatment didn't demonstrate the evidence of effectiveness needed for approval.

Meanwhile, Gilead Sciences shares edged lower in early morning trading after gaining ground in premarket trading Monday.

On Friday, Gilead had received approval for Letairis in 5-milligram and 10-milligram doses to be taken once per day. The Foster City, Calif.-based company said the drug increases the risk of liver injury and birth defects, and as a result, it will be available only to people who take an education program about those risks.

Stifel Nicolaus & Co. analyst Edward H. Nash reiterated a "Buy" rating on the stock, and raised his price target to $88 per share from $87. Gilead intends to make Letairis available in the U.S. early this week, roughly one quarter ahead of Nash's expectations. Nash thinks the drug will be popular, and said heart drugs could become important source of revenue for Gilead.

"We believe Gilead's expansion into the cardiovascular space is a strong strategic move into an area that could develop into a lucrative franchise with the potential for robust growth," Nash said.

Friedman Billings Ramsey analyst Jim Reddoch differed, saying Letairis will not add much to the company's earnings even if sales are strong. He raised his revenue estimate, as the drug will be more expensive than he expected, and maintained a "Neutral"-equivalent rating on the stock. Reddoch expects shares to decline slightly, to $78, over the next year.

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