Why Chelsea Therapeutics Is A Buy Before March 28

| About: Chelsea Therapeutics (CHTP)

Chelsea Therapeutics (NASDAQ:CHTP) shares closed Friday with a huge 61% rise ending at $3.88 per share. Luckily, I was able to get in before the rush because I am confident in their key drug Northera being approved by the FDA. I recommend this stock at its current price:

Chelsea Therapeutics International, Ltd. is a development stage pharmaceutical company that focuses on acquiring, developing and commercializing products for the treatment of a variety of human diseases. The company is developing a therapeutic agent for the treatment of symptomatic neurogenic orthostatic hypotension (NOH), associated with primary autonomic failure and falls related to NOH in Parkinson's Disease (PD), as well as other norepinephrine-related conditions and diseases, including intradialytic hypotension (IDH), fibromyalgia, adult attention deficit hyperactivity disorder (ADHD), chronic fatigue syndrome (CFS), freezing of gait in PD and Down's Syndrome.

The current market price is $3.88, and I agree with the one-year analyst price target of $11.17. This represents a 187% upside potential, once Chelsea's key drugs are approved. Upside figures as these are not rare in the pharmaceutical world. A recent example would be Vivus, Inc (NASDAQ:VVUS), which jumped 120% on its FDA panel recommendation for new obesity drug. Granted Vivus had a recommendation of 20-2 where Chelsea Therapeutics had a vote of only 7-4. But I am still confident in the company.

Index - P/E - EPS -0.90 Insider Own 1.88% Shs Outstand 66.19M Perf Week 11.17%
Market Cap 256.82M Forward P/E - EPS next Y -0.75 Insider Trans 10.67% Shs Float 56.61M Perf Month -14.54%
Income -50.38M PEG - EPS next Q -0.33 Inst Own 69.69% Short Float 8.41% Perf Quarter -15.10%
Sales 0.00M P/S - EPS this Y -10.96% Inst Trans -1.62% Short Ratio 3.08 Perf Half Y 7.78%
Book/sh 0.73 P/B 5.32 EPS next Y 24.00% ROA -129.76% Target Price 11.17 Perf Year -7.62%
Cash/sh 0.87 P/C 4.46 EPS next 5Y - ROE -185.12% 52W Range 2.18 - 6.06 Perf YTD -24.37%
Dividend - P/FCF - EPS past 5Y 0.00% ROI -185.12% 52W High -35.97% Beta 1.51
Dividend % - Quick Ratio - Sales past 5Y - Gross Margin - 52W Low 77.98% ATR 0.47
Employees 30 Current Ratio 4.30 Sales Q/Q - Oper. Margin - RSI (14) 48.44 Volatility 15.51% 8.80%
Optionable Yes Debt/Eq 0.00 EPS Q/Q 19.47% Profit Margin - Rel Volume 16.76 Prev Close 3.88
Shortable Yes LT Debt/Eq 0.00 Earnings Feb 27 Payout - Avg Volume 1.55M Price 3.88
Recom 1.50 SMA20 -3.17% SMA50 -16.18% SMA200 -15.63% Volume 0 Change 0.00%

In 2011, the U.S. FDA approved 30 new drugs, compared with 21 in 2010, including novel approaches to managing such diseases as auto-immune disorder lupus and chronic hepatitis C virus. I believe the FDA's recent approval rating of drugs work in favor for Chelsea Therapeutics, especially given the FDA's encouraging first cycle review approvals.

Also, looking further into the companies big 7-4 "win"; of the seven votes in favor of approval, four included cardiologists and one a neurologist. Only one cardiologist voted against the drug. This is a very persuasive argument for Northera. I believe that the FDA is likely to show Chelsea the same leniency it gave Shire (SHPGY) over its drug Midodrine. The FDA is allowing Midodrine to remain on the market for the treatment of NOH despite the lack of data demonstrating the drug's benefits. On Friday, the panel stated its clear desire for Chelsea to conduct new studies of Northera, mainly to demonstrate the drug's robust effect. And if Chelsea gets the same deal as Shire, it will be allowed to have Northera trials to be done post-approval.

A final decision is expected by March 28 and my recommendation is to buy before it is too late.

Disclosure: I am long CHTP.

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