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Chelsea Therapeutics (NASDAQ:CHTP) started 2012 as a fairly well-capitalised company as one-product groups working in CNS go, but will probably exit the year among the smallest of the small, and with little hope of getting the hypotension treatment Northera past U.S. regulators anytime soon. In a trial in Parkinson's disease patients the candidate reduced dizziness and lightheadedness, but failed to show that it prevents falls among those suffering dangerously low blood pressure.

That the trial's primary endpoint was shifted from the latter measure to the former will not help support approval, and in any case the FDA had already told Chelsea that the study was insufficient. How the North Carolina group funds itself to regulatory submission is anybody's guess -- following a round of layoffs it estimates a cash runway to mid-2014, and with the share price now flirting with the Nasdaq $1 delisting threshold an equity offering would be hard to pull off.

Accentuate the Positive

Having recovered somewhat from the FDA's notice in July that data from the 306B study would be insufficient to support approval to treat neurogenic orthostatic hypotension in Parkinson's disease patients, the stock fell 36% to $1.14 yesterday. Shares now stand at 78% below their levels of the start of the year, valuing the company at $76 million.

That tumble is not too surprising. Northera has been used for more than 20 years in Japan as Dops, and has had a string of late-stage setbacks dating back at least three years in the U.S. It came as close as a 7-to-4 FDA advisory committee vote to approval, only to see the agency send it back because of the conflicting data ("Chelsea falls back on latest trial after FDA rejection," March 29, 2012). Japanese data have also linked the agent known generically as droxidopa to a life-threatening neurological disorder.

Also not surprising is the Chelsea leadership team's touting of the positive aspects of the 306B data and explanations for the misses on fall prevention. Statistically significant reduction in symptoms of lightheadedness and dizziness were the measures the FDA regards as most important, executives told investors in conference call, while efficacy in fall prevention is very difficult to show because of patient variability -- some fall frequently, some not at all.

A trial to measure fall prevention would be designed differently, according to the company, including stratification of patients based on a baseline fall rate. In any case, the change in the primary endpoint came at the behest of the FDA, which also raised the possibility that the 306B results might have been affected by the unblinding of data from the first part of the programme, 306A.

The FDA's objection to Chelsea's analytical plan -- the announcement of which in July was accompanied by a one-day share price plunge of 41% to 87 cents -- was the reason that the agency wants additional clinical trials before it will approve Northera.

Empty Pockets

A new trial will be a big ask. Chelsea went into cash-preservation mode over the summer, knocking $3.5 million from its payroll, not to mention shaking up the executive suite with the departure of Chief Executive Simon Pedder and removal of Chairman Kevan Clemens. The group now expects to have $27 million in the bank at the end of 2012, sufficient to fund operations through the second quarter of 2014.

Data analyses and meetings with the FDA will mean the next Phase III trial will not get under way until the second half of 2013. It is looking doubtful whether Chelsea has enough cash to fund the entire trial, not to mention prepare a regulatory submission. With as much trial difficulty as Northera has experienced, partnership seems out of the question, so borrowing or tapping shareholders for more cash seems the likely scenarios, neither of which will be taken well by investors.

It is not unprecedented for drugs with as many clinical and regulatory setbacks as Northera to achieve approval -- witness Transcept Pharmaceuticals' insomnia pill Intermezzo, which seemed to have many cards stacked against it ("Intermezzo approval not the end of Transcept thriller," Nov. 24, 2011). However, it requires a stubbornness bordering on foolhardiness, not to mention a lot of cash. Chelsea may have plenty of the former, but it has little of the latter.

Source: Investors Kick Chelsea After It Trips On Its Northera Data Again