Chelsea Therapeutics Minor NDA Deficiencies Create Opportunity For Huge Gains

| About: Chelsea Therapeutics (CHTP)

Investors have long known that there can be huge money in orphan and ultra orphan drug companies, and in 2013 they have rewarded stocks like Raptor Pharmaceuticals (NASDAQ:RPTP) and Aegerion (AEGR) accordingly. Orphan drug status is granted to advance the evaluation and development of products that demonstrate promise for the diagnosis or treatment of rare diseases or conditions. The following company will be no different:

Chelsea Therapeutics (NASDAQ:CHTP)

The FDA granted Northera (Droxidopa) orphan drug status in 2007. In November 2011, the FDA granted Northera priority review. Priority review is reserved for drugs that offer a major advance in treatment, or provide treatment where no adequate therapy exists.

Northera is a drug for the treatment of symptomatic neurogenic hypotension (NOH) associated with Parkinson's disease. The company has had its issues getting Northera on the market. On February 23, 2012, Northera was given an up vote from the FDA Panel by a 7-4 vote. However, the FDA decided to issue a complete response letter (CRL) on March 28, 2012. The FDA wanted more data to support efficacy and demonstrate durability over a 2-3 month period. CHTP went back and received guidance from the FDA in 2012 and it was determined that its 306B trial would not be suitable or able to be modified. The company and investors believed a new trial to confirm efficacy would be needed before any chance of approval.

On February 20, 2013, CHTP was informed by the Director of the Office of New Drugs at the FDA stating that the Study 306B can serve as the basis for resubmission of Northera. The Director states:

The guidance suggests that "data strongly demonstrating a short-term clinical benefit (e.g., improvement in symptoms or ability to function) of droxidopa in patients with NOH would be adequate for approval, with a possible requirement to verify durable clinical benefit post-approval."

NDA (New Drug Application)

The previous NDA was originally accepted, but on July 29th, the FDA told the company:

the FDA has now notified the Company that they have noted deficiencies that relate primarily to the formatting of certain submitted electronic datasets and statistical programs describing the methods used to generate tables and listings. The deficiencies are unrelated to study conduct, interpretability of study results, or validity of study conclusions.

Therefore on August 14th, the company announced:

Chelsea Therapeutics International, Ltd. today announced that it has submitted additional information to the U.S. Food and Drug Administration (FDA) to resolve certain technical deficiencies in the Company's resubmitted New Drug Application (NDA) for NORTHERA (TM) (droxidopa). Pending confirmation by the FDA, the resubmission is expected to be deemed a complete response to the March 28, 2012 Complete Response Letter issued by the Agency.

The FDA has a 14 day period to respond to the NDA which would be August 28th. The company believes that this is a non factor and is fully confident of a positive response.

Northera Possible Indications:

Compound Indication Phase I Phase II Phase III NDA Submitted
Droxidopa (Northera™) Symptomatic Neurogenic Orthostatic Hypotension ----- ----- ------ ---------
Droxidopa Intradialytic Hypotension ----- ------
Droxidopa Fibromyalgia ----- -----


The drug was approved in Japan in 1989 for treating frozen gait and dizziness on standing associated with Parkinson's disease as well as orthostatic hypotension. Japanese regulators expanded Droxidopa's marketing approval to include prevention of vertigo, dizziness and weakness associated with orthostatic hypotension in hemodialysis patients in 2000.

The current market capitalization is approximately 200 million with 67 million shares at a current price per share of $3.01. The company projects revenue between $300-$375 million per year not including the potential revenue for the other indications for Fibromyalgia and Intradialytic Hypotension as listed above.

Therefore, CHTP deserves a PPS of $6 to $7 based on the high probability of approval and potential for other possible indications for Northera. Biotech guru Adam Feuerstein agrees that it is undervalued and is bullish on CHTP as he mentioned here on his very popular "Biotech Stock Mailbag":

I believe there's a 75% chance FDA approves Northera on the second go-around with Chelsea. The stock's current market value of less than $200 million does not fully account for the drug's approval and commercial market opportunity.

For investors looking to invest in the next biotech company poised to produce significant short term returns due to upcoming catalysts, Chelsea Therapeutics provides an attractive speculative pick for potentially high returns.

Disclosure: I am long CHTP. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.