Chelsea Therapeutics: Not Worth Speculating

A comment from an anonymous poster regarding Chelsea Therapeutics (CHTP):

Hi VFC!

What are your thoughts on CHTP (Chelsea Therapeutics)? Does it pass your initial "smell test"?

Thanks!

VFC's Take: While I do think that CHTP holds some potential, I will say that I think that there are better speculative investments out there for the following reasons:

It takes a lot of 'speculative money' for the small investor to buy enough shares of CHTP for over six bucks a pop, and if anything goes south in the pipeline (such as any unforeseen troubles with the ongoing Droxidopa trials) then a 50% price cut could be in store and the small investor would lose 'big money.' Personally, I like my 'FDA plays' to come from smaller and lower priced companies than Chelsea.

That being said, Droxidopa is already marketed in Japan and if the hypotension Phase III trial results are positive later this year, Chelsea intends to file an NDA with the FDA sometime in the fourth quarter.

Also of note, the stock has already been a triple over the past few months and shareholders holding for Phase III results should sell a bit of profit - in my opinion - to reduce their risk exposure to the possibility of sub-par results. You never know what could happen in the world of clinical trials and FDA approvals - just ask Dendreon (DNDN).

I'm also not a fan of buying a stock at the high right before trial results are due out, especially not in this volatile age of stock trading.

To answer the poster's question, CHTP does pass my 'smell test,' but it's a little bit expensive for my tastes as a small investor for a company with nothing approved.

Disclosure: No position.

Comments

[DryShips:]

You got that one right. Risk/Reward is certainly not favorable at this point. CHTP is $7 a share now and has a 52 week low of $1.09. I would be a seller at these levels.

Sep 15 10:36 AM

[hoopdreamer...:]

How do you make your assessment when you know absolutely nothing about what the product is, chances for a successful trial, upside potential and downside risk? I would venture to say this trial will be a solid outcome and the still has room to go.

Sep 16 10:59 AM

[DryShips:]

Nice call, VFC

Sep 24 10:22 AM

[Megalex:]

Now that it's taken the hit, is it safe to get back in?

Sep 24 03:24 PM