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Chelsea Therapeutics International, Ltd. (NASDAQ:CHTP)

2012 Wedbush PacGrow Life Sciences Management Access Conference Call

August 14, 2012 2:30 pm ET

Executives

Joseph G. Oliveto – Interim Chief Executive Officer

Analysts

Liana Moussatos – Wedbush Securities Inc

Liana Moussatos – Wedbush Securities Inc

Okay, we are going to get started. I’m Liana Moussatos from Wedbush, and it’s our pleasure to have Joe Oliveto, CEO of Chelsea Therapeutics to give us a corporate update. Joe?

Joseph G. Oliveto

Thank you, Liana, and thanks to the Wedbush folks for inviting us today. Let’s see, great. So I’ll just remind you that I’ll be making forward-looking statements; I’ll direct you to the website where you can get our SEC filings, and we’ll get into the Northera droxidopa pitch. This slide, I’d like to remind people that well, the vast majority of what I’m going be speaking about today is on our lead indication of neurogenic orthostatic hypotension and the company is very focused on neurogenic orthostatic hypotension. There’s a lot of legs behind droxidopa Northera for other indications, it’s on the market in Japan for Parkinson’s Disease and intradialytic hypotension and we’ve studied it for fibromyalgia, ADHD and Parkinson’s Disease. So just want to leave you with the idea that there is a lot of opportunity for Northera once we get past the first hurdle for our lead indication.

Okay. So what is Northera? Northera is a prodrug of norepinephrine, it’s directly metabolized into norepinephrine, and it’s got a mechanism very similar or exactly similar to the way levodopa is converted to dopamine and that natural mechanism converting into norepinephrine the same endogenous norepinephrine that you and I have in our bodies, sort of lends itself to some safety advantages that you’ll see later on and it’s also the beneficiary of well documented safety and efficacy profile from being the market leader in Japan for the last couple of decades.

So what is Neurogenic OH or neurogenic orthostatic hypotension? I think many of you in the room might be familiar with orthostatic hypotension, again a drop in blood pressure when going quickly from supine or bending over to standing up, some of us may have even experienced this occasionally, but neurogenic orthostatic hypotension is really a result of depleted norepinephrine levels, and Northera treats the root cause of that neurogenic OH and these patients are really pretty severely impacted by this disease, I mean unlike us maybe after some dehydration or night out have that fleeting dizziness, these people can’t stand for more than a couple of minutes a few times a day, many of them, so it’s really debilitating, it’s impactful on their quality of life and with dizziness and lightheadedness comes falls and really major events. So we are pretty proud to be offering these people an opportunity to improve their lives.

Now the Neurogenic OH patient comes from coterie of underlying neurological diseases, I have a few listed here. Neurogenic OH is orphan at less than 200,000 patients in the U.S. and clearly the largest population that makes up the disease (inaudible) is Parkinson's Disease.

The therapeutic options for Neurogenic OH are limited; there is only one approved drug for this indication and that’s Midodrine and it’s been on the market for some time now and it was approved based on accelerated pathway and demonstrating improvements in blood pressures as surrogate marker for symptoms. The drug was never able to show an impact on symptoms even though that was a post approval commitment the company Shire is still trying to do that.

Combined with that inability to show impact on symptoms, the drug is a very potent vasoconstrictor and increases blood pressure quite dramatically and these patients with neurological disease is not only of hypotension or low blood pressure upon standing, they also experience hypertension or high blood pressure when they’re lying down, so a very potent vasoconstrictor that is indiscriminate is really not the ideal therapy for these patients.

As a result of at hypotension and that inability to prove benefit on symptoms Midodrine is saddled with a black box; has tolerability issues. The other sort of disheartening thing about this drug is that Shire really never spent the time educating the Parkinson’s Disease physicians about this drug, so there is really poor penetration into the largest market.

So we feel that Neurogenic OH remains a very significant unmet medical need and again we’re really proud to be working in this area to provide Droxidopa. Now we’ve been working in the area for a while, six years, we’ve learned a lot, we’ve learned that there is no successful trials in this area, whether they be done by Shire or anyone else and some of the key challenges are listed here and anyone who has followed the story has heard a lot about these.

We’re dealing with different patient populations of underlying diseases so the heterogeneity creates issues, we’re dealing with an elderly population with potential issues of recall and being able to define their symptoms and we’re dealing with this lack of standardized studies and standardized end points.

But we’ve come a long way. We’ve had successful trials now, which I’m going to share with you, we’ve learned a lot from the failed trials and the latest issue that we are dealing with and interacting with the FDA on is the duration of these studies and the difficulty in doing long-term double-blind randomized trials. Clearly, these patients frequently drop out for non-drug effects, they have treadmill effects where it’s hard to remember the impact of your symptoms or how you’re feeling relative to two months ago, where you were a base line and in general investigators are very reluctant to place these [frail and elderly] [ph] patients into long-term placebo control trials for the fear of falls and the fear of all the rigors that come with a clinical trial. So when you think about long-term trials that are placebo controlled you have to think about not being able to get the most severe patients. And these are topics that we’re in process of interacting with the FDA on and having a fruitful scientific dialog on.

Okay, so I use this slide to sort of orient people to the numbers here of our studies, the boxes in blue are the pivotal efficacy studies, studies 301, 302 and 306. We also have a long-term, open-label, efficacy and safety studies as part of the filing package that we submitted.

This is a top line view of the results from those studies; I’ll get into and present some of the data from each of these, but clear to say that one consistent result that we’ve received across all of our studies, short-term, long-term, open-label, double-blind is the safety profile and the fact that we have been able to mimic the stellar safety profile that was found in Japan and has been seen as a result of again two years of marketing of the product, we see a very small increase in supine hypertension versus placebo, nothing near the numbers that we see with Midodrine, the most common adverse events are headache and dizziness, they’re mild in severity and generally very transient, and our long-term extension studies, the type and rate of adverse events and death were consistent with expectations of the population, wherein we are dealing with severely ill patients, elderly patients and again safety is a very important factor for these patients.

Let me get into some data; this is data from our Study 301, the most successful double-blind, randomized placebo control trial ever conducted in this disease state, the only successful one actually. What you’re seeing here is all the outcome measures from the orthostatic hypotension questionnaire, which captures a series of symptom responses things like dizziness of vision, fatigue, weakness, concentration as well as components of daily activity and whether they are able to walk or stand for short or long periods of time.

And what you see in general is some very nice results across the coterie of different symptoms and disease activities and again this is very compelling to the Agency, when we showed them this in advance of our filing, and most important to the Agency was the primary endpoint, which is in blue here to the left, the OHQ composite score, this takes all of those points those ten questions and combines them into a composite and as you could see here it favored Northera with a p-value of 0.003.

So, on the next slide, I take that composite endpoint as well as the dizziness score which is the cardinal feature of the disease and I show you the results of Northera against placebo and again p, 0.003 for the primary endpoint of the OHQ composite and a p less than 0.001 for dizziness, lightheadedness which is again the cardinal feature and the feature the FDA is now most interested in seeing with regard to any clinical trials.

Now these are all the patients, these are the means and very compelling data came out of our preparations for the Advisory Committee and our responder analysis. So here again same study, same patients, but we take the subset that actually had a response and really the most dramatic response, whether it be this for the OHQ composite, whether it be two units, three units, four units, as you get the more severe patients with the biggest response, you see an even greater separation between droxidopa and the placebo group seen here. And it’s consistent, if not more dramatic when you look at item one, lightheadedness or dizziness. Here the patients, some of our more severe patients had four, five, six, seven unit improvements from base line to the end of the study, again droxidopa performing consistently better than placebo.

This, again a very important part of the Advisory Committee conversations, and weighed into a lot of the discussions. So 301, again the only study ever to show a benefit on symptoms in this patient population; Study 303 took the patients from 301 and 302 and put them into a long-term open-label study. So what you see here in green is a drop in symptoms, whether they’d be solid green line of the OHQ composite or the dashed line of dizziness, lightheadedness. You see a nice drop from an average 6.5 or so down to three or so, in the actual 301, 302 studies, and then you see a consistent maintenance of that effect over the course of the one year of the 303 study. And likewise on blood pressure in blue, you see a rise in blood pressure and that blood pressure being maintained over the course of the year in the 303 open-label study.

Now turn over to study 306, and 306 was a study that was not included in the NDA, again prospectively defined with the Agency what the filling would look like, they agreed that this study should not be included. Let me walk you through some of the components of this design here.

The study starts with a double-blind randomized titration phase, which is something new for us. In the past we would have open-label titration, here they don’t know if they’re in placebo or drug, they’re worked up over a course of up to two weeks to find their optimal dose. And they are maintained on that dose for an eight-week period, again trying to get at a longer term evaluation of efficacy and safety.

So the important point of this study in addition to the double-blind titration phase and the longer study is also that we prospectively evaluated falls in the study. In studies 301 and 302, we had some anecdotal data that placebo patients fell more than droxidopa patients and here we prospectively look for that with daily diaries on falls.

So what we did is we broke this study into two, looking at the first 51 patients from this study, we call that study 306A. And what I have here is the OHSA item number one, lightheadedness, at various time points in the study. Droxidopa in blue, placebo in grey you see a differentiation between the two, you see it stronger in the first few weeks, one and two, and you see them coming closer together in the longer time points we gave. We don’t think this is a drug effect wearing off, but rather some of those issues associated with the long-term trials. Nevertheless we do see differences and we are using this data to mimic and model what our expectations are for study 306B.

The other very interesting data that came out of these first 51 patients was the result on falls. This is cumulative falls in the two groups with the hash line being the total number of falls in the placebo group, 27 patients fell a total of 197 times in the study, again over eight to 10 weeks, 24 Northera patients fell 79 times over that same time period, okay. So dramatic separation, you’ll notice that there is a discrepancy between the number of patients in this first 51, so 27 versus 24. So we do standardize this for a better comparison and what you’re able to see is that there is actually a 60% reduction in falls per patient per week on droxidopa compared to placebo.

Let me switch over to the regulatory timeline, starts really in late 2010, when we approached the Agency with our data, and sought advice for the acceptability of a package and it was agreed to, that it would be appropriate to file an NDA with Study 301 as the sole, pivotal efficacy trial, with supportive data from studies 302, 303 and 304.

We did file the NDA towards the end of the summer the following year September 2011, and November the FDA came back the acceptance of the filing and a Priority Review designation and that led to an Advisory Committee meeting in February of this year.

So the Advisory Committee really the briefing document, which you generally see sort of one or two weeks before the actual meeting is where we started really getting a sense of the FDA’s issues with the review.

And in particular, they came up with these four specific issues concerning the duration of the study, not fully accepting Study 302 as a supportive study, the size of our safety database and the fact that they had trouble ruling out potential for rare events and the actual primary endpoint, and I’ll remind you that Study 301 actually had an SPA in place where we had agreement with the Agency on the study design and the endpoint, but again these issues were raised in the briefing document again one or two weeks before the Advisory Committee.

So it definitely sparked some fruitful discussion of the Advisory Committee, very robust discussion, good discussion in many ways. And despite these issues raised in advance, the Advisory Committee voted in favor of approval by a vote of seven to four. And I think that was sort of driven by, sort of the totality of the data and the recognition that this is a difficult disease area to treat as well as the high unmet medical need.

So following the Advisory Committee vote, as we approached our PDUFA date, we did receive a complete response letter from the Agency showing that they did not agree with the Advisory Committee vote. And amongst other things, really two main points came out with regards to their concerns; one being that they did require an additional study, and number two being that that study should be the two to three months period in duration.

The other interesting thing that they did not have in their complete response letter, it was positive was that there were outstanding safety issues that were brought up at the Advisory Committee were not a real concern in the letter. So, sort of a positive take out of the complete response letter. So obviously having to deal with this response letter, we met with the Agency in an End of Review meeting and really focused the discussion on two main areas, one is their concern over Study 301, and the fact that, late in the review they found that a single site actually led and drove a lot of the efficacy results for Study 301. And while 301 is still acceptable as a pivotal study, it is not acceptable to carry the weight of two studies as a result of that site having such an effect.

The second major discussion item at the meeting was what does this additional study need to look like and specifically could Study 306B which at the time was ongoing and well into its enrollment, could that be the pivotal study to support Study 301. Following lengthy discussions and follow-up with the Agency eventually, the Agency essentially indicated that they had theoretical concerns over Chelsea’s potential to be unblinded when we brought the study into 306A and 306B [in that they couldn’t overcome] [ph] those concerns in a way that would allow us to utilize 306B as confirmatory study.

So with that news, it effectively negated us having the ability to really use 306B to support our filing and as a result of that, we stopped enrollment of 306B. And we’ve just announced a couple of weeks ago that enrollment was stopped, the final number of patients enrolled into the study is actually 174 patients. We have an expectation that data will be reported out towards the end of the year. On that study remember it is an eight to 10 week study, so these patients will have to come through and then traditional requirements of cleaning the data and analyzing the data should allow us for reporting at the end of the year.

Despite the FDA’s concerns about the study are theoretical concerns and despite its ability to use this pivotal trial, we still have feelings that this will provide very important clinical insight for the disease as well as for the drug. And even with the total number of 174 and enrollment being stopped prematurely, we still have 80% powering based on missing data excluded for key outcome variables, including OHSA item one, dizziness, again the item of most interest to the FDA at weeks one, two and four. If you remember, this is modeled off of 306A and if you remember that slide I showed 306A did a little better in item one at the earlier time points rather than we gave. We also have greater than 80% powering of this end of 174 for blood pressure changes at week one, as well as the rate of patient reported falls over the course of this trial.

And while we are not powered to see statistical differences out at week 8 we do believe that we will see very important data out there, both in terms of efficacy around these OHSA components as well as safety data. So the plan is to really maximize the clinical relevance of the study, we will change the SAP formulae, we haven’t made our decision yet as of today with exactly what our primary endpoint will be, but I think everyone can understand that it’ll likely be one of the ones that are listed here as well as the algorithm for secondary endpoints et cetera.

So going forward, the company’s really in conserve cash and resources and focus down on getting the study completed and planning for the next study. The team is hard at work looking at all possible designs for that next confirmatory study and we’ll have this study protocols pretty far advanced and we’ll use the 306B data to confirm and finalize our decisions before pulling the trigger on dosing patients.

We’re also being cost conscious and trying to transition patients from current ongoing safety studies, Study 304 to more cost effective access programs and what we’re learning is that these patients really are in need of the drug, we do want to get them the drug, we’re just trying to do it in more cost effective way.

We announced a couple of weeks ago a significant reduction in force basically removing all of our commercial and pre launch infrastructure, and sales and marketing teams, we’ve also cut into some of the research and development teams, but we can maintain enough people to get through this clinical pathway, and we also have changes in the executive management and the Board of Directors.

With these new eyes, we’re evaluating all strategic options right now in a new way and we are also announcing just last week financial announcement on cash and cash equivalents at the end of Q2 of $40.8 million and guidance that would take us into the fourth quarter of 2013, including having clinical work being done in 2013.

So with that, I’ll close and open if there is any questions.

Question-and-Answer Session

Liana Moussatos – Wedbush Securities Inc.

So you mentioned that the top two adverse events are headache and dizziness yet Northera reduces dizziness, so how is dizziness defined differently?

Joseph G. Oliveto

It’s in the eye of the beholder with regard to adverse events, dizziness can be anything; in the OHQ where we define it very specifically, dizziness, patients are informed to rate their dizziness specifically related to their rise from seated to standing position. So they are very crude into what they should be looking for when they rate their dizziness. Dizziness [inaudible] [ph] can be anything, at any point, at any time, so clearly there is a mix between the two and when you’re dealing with Parkinson's Disease patients in particular they have a lot of dizziness and instability associated with their gait and a lot of people will misappropriate the actual term to just call it dizziness or lightheadedness. So

Liana Moussatos – Wedbush Securities Inc

Higher in the drug arm than in placebo arms?

Joseph G. Oliveto

It is slightly higher in the drug arm than in the placebo arm, yes.

Liana Moussatos – Wedbush Securities Inc

Okay.

Joseph G. Oliveto

Okay. But there is a lot of variability around that adverse event.

Unidentified Analyst

Question, in 301, you said it was driven by one center, how many centers did you have and if you look at the remaining centers, was there a difference relative to placebo in that?

Joseph G. Oliveto

Right. So, 301 had something on the order of 80 centers worldwide across I want to say 14 countries. This center had a significant number of patients about 10% of the patients in the study were from this one center and those patients did very well.

When we did sensitivity analysis and you took out the top performing center and the bottom performing centers, you regained statistical significance. And that center that drove it was ex-U.S. when we took out all the ex-U.S. centers and did sensitivity analysis, you still got statistical significance when you are with the U.S. and just increased it by the expected size. So this was all out, put forward and outlined in the NDA and is sort of standard clinical development 101 in terms of your sensitivity analysis when you put these things forward. Okay.

Liana Moussatos – Wedbush Securities Inc

So key variability in the Parkinson’s data subset, so if 306B (inaudible) or dizziness, what’s the next step?

Joseph G. Oliveto

All right, yeah so that’s a good question, I mean we are really confident that we’re going to see positive results in study 306B. The next step would be, that would be a very informative study that it doesn’t work in that population. I don’t know if we would put so much emphasis on statistical significance for the actual endpoint, we fully expect to see it, I mean as you’ve heard we can power it now at 80%.

But the point is that we expect to gain a lot of information from the study, it is the largest study, we should be able to see - do subset analysis, we should be able with a look at a lot of different endpoints both in terms of the more subjective endpoints of patient reported outcomes but real objective endpoints like blood pressure and falls specifically. So when you say if it misses statistical significance on maybe one of the items, maybe your primary, but you have a really robust and dramatic impact on falls what would that mean in terms of it being a positive study in that. Right now since it’s not sort of a pivotal efficacy study for approval, we would still view that as very informative and we’d use that to actually inform us as to what our next study should be, whether it should be in Parkinson's, whether it should, whether that endpoint should be appropriate or whether we should go with a more objective endpoint.

Liana Moussatos - Wedbush Securities Inc.

Didn’t the FDA emphasize they wanted dizziness as the primary endpoint?

Joseph G. Oliveto

They do want dizziness as the primary endpoint that is absolutely clear. So we are fully expecting to have dizziness show up in that population. So data will tell at the end of the year. Yes.

Unidentified Analyst

(Inaudible)

Joseph G. Oliveto

Yes, it goes with the territory with an orphan disease however though. So we’ve done studies where we have taken (inaudible), Parkinson’s, PAF patients and MSA patients that was Study 301, where we’re able to overcome that variability with the results.

Study 302, we could not overcome the variability, so we went into Study 306 in a single population, Parkinson’s patients only. So that’s just one of the many variables that we take into account as we design the studies. But your answer is clearly yes, we’d prefer to be in a single population.

Liana Moussatos – Wedbush Securities Inc

Okay.

Joseph G. Oliveto

Well, thank you very much for your attention.

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