MrCoop9's  Instablog

What a great week for those that had the foresight to pay attention to the facts surrounding Northera, Chelsea Therepeudics lead drug.

When I first took a position in the stock ( Sept 24th, 2009 ) I knew very little about Northera ( Droxidopa ) or Chelsea (CHTP) for that matter. I was looking for fast gains on a technical bounce due to the negative over-reaction to the 302 data. I was lucky enough to pick up shares in the pre-market for 1.57. Those shares are long gone (for a very nice gain), but the long term potential for Northera was unfolding as I started some serious investigation into its prospects.

I’m going to go over some of key features that many who have been long CHTP overtime already know but this is more for the benefit of anyone that is just starting their DD.

Droxidopa ( Northera ) has been on the market in Japan for over 15 years, approved for Neurogenic Orthostatic Hypotension, Intradialytic Hypotension, MSA, PAF, and PD, as well. CHTP has the marketing rights to the ROW excluding the Asian region. These marketing rights are/will be patent protected for 12 years under the Orphan Drug Law and the SPC. In short, no generic competition for 12 years. With these approved indication along with other indication being investigated ( Fibromyalgia and Chronic Fatigue Syndrome, ADHD, Downs Syndrome and others ), the potential patient population for on label and off label use is quite large. As of today, the only approved drug ( in the U.S. ) for the treatment of NOH in PA is Midodrine. Midodrine has been in the news recently due to the possible removal from the market by the FDA.

CH-4051, CHTP’s leading antifolate in trials (Phase 2 ) for the treatment of RA. Other diseases that may potentially be treated with this compound include psoriasis, Crohn's disease, ankylosing spondylitis, uveitis, psoriatic arthritis and several different kinds of cancer. CH-4051 is being tested against Methotrexate , the most commonly prescribed therapy for rheumatoid arthritis. Chelsea's preclinical study showing CH-4051 to have superior efficacy to methotrexate in delaying the onset of rheumatoid arthritis, significantly decreasing the severity and, at certain doses, COMPLETELY BLOCKING all development of the disease. With a superior safety profile.

The administration of Methotrexate is known to cause serious side effects such as pulmonary fibrosis and elevations in liver enzymes, which can be indicative of early liver and kidney damage. Over twenty million people suffer from rheumatoid arthritis worldwide creating a global pharmaceutical market estimated at over $6.3 billion in 2004.

As of today, Chelsea has not partnered with CH-4051. Not due to lack of interest by “Big Pharma” but (IMO) due to the recognized potential for global sales by management and the desire to carry these trails on a stand alone basis, collecting more data and creative a greater value proposition for Chelsea and its shareholders. Once they partner, and they will, this catalyst for the stock price will be substantial. A brief look at the management team will confirm their ability to guide these drugs through the intricacies of development to NDA and post approval marketing.

Now, back to the data for Northera. You must , as I have , focus on the details. With some drug trials, the drug itself fails, with others, as is the case for trail 302, it failed to meet the pre-set endpoint when compared to placebo. Changes in most measures (16/17) of signs and symptoms of orthostatic hypotension from randomization to the end of study favored Northera treated patients relative to placebo treated patients. Importantly, improvements were observed in the ability to perform activities requiring standing for a short time (p<0.05), standing for a long time (p<0.01), activities requiring walking for a short time (p<0.05), in the composite OHDAS (p<0.01) and in the composite global OHQ (p<0.01) scores.

What I found most intriguing was the statistical improvement of the control group ( placebo ) over baseline post randomization. The common sense conclusion is a carry over effect of Northera. This carry over effect was actually expected by management evidenced by the 301 trail design. 301 was designed with a wash out period and was running concurrently with study 302. Prior to unblinding 301, management asked for and received FDA approval to change 301’s existing endpoint (dizziness) to the more adequate composite OHQ global score. While this decision was risky and added time to the overall timeframe to getting Northera on the market. The fact that the FDA agreed with the change shows the strength of managements ability and the strength of the data.

If , as stated by Simon Pedder (CEO) the OHQ composite score had been the primary endpoint in 302 the trial would have been successfull. He has also stated at a recent conference that from the open label data from 301, the wash out period has provided the expected results as patients on placebo have been shown to revert back closer to baseline. Open label data has shown patents entered the study with mean score (OHSA) of 6 to 6.1 prior to titration. At the end of titration their mean scores where down to 1, showing significant effectiveness of Northera. At the end of the washout period patents were back up to a score of 5.4.

Chelsea has conservatively estimated U.S. potential sales of Northera at 300 - 375 million. If the FDA follows through with their proposed removal of midodrine from the market, this number potentially increases dramatically. It is my belief that even without the withdrawal of midodrine, Northera will become the standard of care in NOH in PA due to its superior effectiveness and benign safety profile. (Note: Midodrince carries a black box warning label ).

The FDA stated that around 100,000 patients filled prescriptions for brand or generic Midodrine in 2009 in the U.S. Branded Midodrine is selling for approximately $15 per day while generic sells for $11. If you calculate the total sales number using $12 per (avg.) daily dosage you end up with a current market worth 438 million. Per statements from Chelsea’s CEO , Simon Pedder, CHTP’s projected pricing model for Northera is at $30 per day. This puts the revenue potential over 1 billion for just the U.S. market. Even if you discount these numbers for compliance at 70%, the revenue projections still double the previous projections.

Good investing to all..J