Chelsea Drops While Trying To Prevent Falls

Apr.10.12 | About: Chelsea Therapeutics (CHTP)

On March 28, 2012 Chelsea Therapeutics (CHTP) received a complete response letter (CRL) from the Food and Drug Administration (FDA) for the company's new drug application (NDA) for Northera (droxidopa) to treat people suffering from symptomatic neurogenic orthostatic hypotension (NOH). In the CRL the FDA asked Chelsea to conduct another study which can demonstrate the drug continues to work for patients over a two to three month period.

Trial 306b Waiting in the Wings

Investors will undoubtedly be wondering if the 306b study Chelsea is currently conducting might be sufficient to demonstrate the durability of effect the FDA wants to see. The short answer is perhaps. The longer answer is, first and foremost, Chelsea would need to negotiate with the FDA regarding the trial's endpoints. 306b does measure the mean change in the composite OHQ, the primary endpoint used in the highly successful 301 study, but as a secondary endpoint. 306b simply isn't powered to use the same endpoints 301 did. Currently, the primary endpoint in 306b is the comparison between drug and placebo on the rate of patient reported falls from baseline till the end of study.

Investors should realize there is increased trial risk with 306b because it is only enrolling Parkinson's (PD) patients while 301 enrolled patients suffering not only from PD but also multiple systems atrophy (MSA) and pure autonomic failure (PAF). Treating different patient populations increases the chances of unexpected trial results. This is further complicated by the fact that in trial 302 PD patients were the most responsive while in 301 they were the least responsive.

Assuming the company and the FDA agree on the suitability of study 306b, investors will then want to focus on whether the trial can successfully blunt the management theorized carryover effect resulting in higher than anticipated placebo responses. High placebo responses have been blamed for trials 302 and 303 failing to meet statistical significance. A quick overview of NOH and Northera is likely a good idea here.

NOH is a sudden fall in blood pressure when standing from a sitting or lying position. Symptoms include lightheadedness, dizziness, blurred vision, falling and syncope. NOH is a disorder of the nervous system resulting from a deficient release of norepinephrine. Norepinephrine is the neurotransmitter that signals blood vessels to constrict. Normally, when we stand, norepinephrine gets pumped out of our neurons and tells the vasculature in our brain to constrict. This keeps us from becoming dizzy when we stand up. When we sit back down the norepinephrine that is still in our system and was not metabolized gets reabsorbed. When we sit, the blood pressure in our brain comes back down and everything returns to normal. Northera is a precursor or prodrug to norepinephrine. When taken it is directly metabolized and turned into norepinephrine and stored in the neurons.

Study 302 and 303 both sported a withdrawal design. All patients were given Northera initially and then randomized into either a group which continued to receive the drug or a group given a placebo. The placebo group performed better than expected and Chelsea believes this is because Northera replenished norepinephrine levels to the point that the neurons stored the neurotransmitter for later use. Both trials didn't run long enough for these placebo patients to stop benefiting from having previously taken the drug.

Unfortunately, 306b is designed so all patients will receive varying doses of Northera for up to two weeks initially before being randomized to continue receiving the drug or a placebo. Fortunately, the drug vs. placebo period lasts eight weeks. Hopefully, this is more than enough time for any carryover effect to cease.

Durability of Effect

At the Advisory Committee meeting both the panel members and FDA staff felt Study 301 on its own would have been sufficient for approval but the lack of long-term benefit from 303 called this into question. Can 306b show durability of effect over two or three months? It should be able to but only if it actually exists. The interim data from 306, now referred to as 306a, showed there was a greater difference between placebo and drug after one and two weeks than at the end of eight weeks. Both 302 and 301 studies were significantly shorter than eight weeks and both yielded very good data. Management alluded to the age of the patients and hinted at the untrustworthiness of their responses. Decide for yourself the merit of this positioning. Personally, I would like a closer look at the falls data. If the rate of falls increased week after week in the drug arm then maybe we are looking at diminishing returns.

Black Box Warning

In the CRL the FDA also recommended a black box warning related to supine hypertension be included in the labelling. They indicated this warning could be removed with supportive data derived from patients while they are lying completely flat. Interestingly, the standard of care (SOC) is to measure supine hypertension on a tilt table at 30 degrees. In 306b Chelsea is collecting data based on the SOC but not while patients are completely flat.

Midodrine, the current, but lacking, SOC drug for NOH also has a warning of supine hypertension so Northera would lose a nice market differentiator if it ended up with the same warning. At the very least, Chelsea hopes to convince the FDA to use language that differentiates the risk between the two drugs since data to this point shows a much higher prevalence of supine hypertension using Midodrine than using Northera.

A New Trial?

Management hopes to talk with the FDA within sixty days about a variety of topics. Any news supporting the viability of 306b as a pivotal study will undoubtedly push the stock higher but given the challenges and risks associated with that study a new trial might be the surest way to proceed. Chelsea wants to eventually obtain a much coveted falls label claim for Northera but the FDA has already stated an additional trial beyond 306b would be required for support. A new trial enrolling the proper patients, using proper co-primary endpoints, using induction over withdrawal design, and lasting two to three months as the FDA requests sounds less risky than counting on 306b to deliver the goods. However, management may feel a quicker yet still realistic path to market is to change the current 306b trial and get it approved with the supine hypertension black box label warning.

Passing Around the Hat

Despite guiding cash is sufficient to last into 2013, the company is going to need to raise more funds. They ended March 2012 with over $50 million. Negotiations with the FDA and potential changes to 306b will require more time and money. A brand new trial would likely take two years to run and cost over $28 million.

My guess is the company will wait until late June or early July to raise cash. News from talks with the FDA about 306b might come early June and data from the CH-4051 phase 2 trial in Rheumatoid Arthritis is due later that same month. Will management roll the dice on a higher stock price after these events? I think the bigger question is what they decide to do with 306b after input from the FDA.

Disclosure: I am long CHTP.