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CHTP: Chelsea Therapeutics Mid-Day Update

|Includes: Chelsea Therapeutics International, Ltd. (CHTP)

The other day we detailed our thoughts regarding Chelsea Therapeutics and its NDA drug candidate, Northera. Since then we have seen shares spike as much as 25% on steadily increasing volume and interest. We initially thought we would see a lower range leading into the FDA decision but now can see a path to a pre-approval price in $6-6.50 range barring any surprises. We think that the market, and more importantly some larger institutions, has been doing the same calculus we have. A 16-1 panel vote + 2nd time around + Orphan drug designation + potential for a near term partner = I don't want to risk being out of this right now. This is not to say that there is zero downside, however for reasons too numerous to list the most logical downside is that of a delay due to labeling. I said before that I believe the FDA had plenty of time to consider labeling for Northera the last time around (and there is back and forth from the FDA which may be researched on that point). This article (and the paragraph below) from the Global Genes Project which explains the FDA's decision to allow the 306 Study was highly persuasive to us as we think it might be to all interested parties:

"In February, the FDA changed its position, agreeing to use the 306B study as part of a new submission for approval. Specifically, the FDA suggested short term benefits from 306B could serve as a basis of approval if durability questions could be answered in a post-approval follow up study. That news prompted Chelsea to refile for Northera's approval this summer, resulting in an expected February 14, 2014 FDA decision date. It also prompted Chelsea to address the durability issue with the launch of a new study that enrolled its first patient in early December."

It remains difficult to project a post-approval number but I am leaning toward the higher end of our previous commentary on the subject. As for what we could see on any delay I think a move back to the mid-4's is possible. As of this writing the share price for CHTP is $5.34 on over 6 million shares traded.

As always please do your own due diligence. Do not rely on us or any other source when making investment decisions. Instead consult with a trusted financial adviser.

Disclosure: I am long CHTP.