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Why A Risk With Chelsea Therapeutics Could Pay Off Soon

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

If you have followed the difficult path that Chelsea Therapeutics CHTP has had in the past with its lead drug Northera, then you're aware of challenges, and ups and downs that the company has faced. Northera is designed to treat symptomatic neurogenic hypertension symptoms (chronic drop in blood pressure on standing up) as related to Parkinson's disease. The FDA granted Chelsea orphan drug status that provides for a seven-year marketing exclusivity from the day of approval which was in 2007.

But a catalyst event right around the corner of the new year may make the frustrations pay off for investors. The possible good news may be in January of 2014 as the FDA will again be reviewing the drug after an initial false start of sorts. As reported Chelsea's 306B study for Northera was given priority review along with FDA panel approval recommendation in early 2012. But to the surprise of many the FDA said the data was deemed to be inadequate and did not provide sufficient evidence to prove the efficacy of the drug and therefore rejected it.

In a turnaround, the FDA in February of 2013, determined that Chelsea's data from the 306B study could be used and did validate that the data showed compelling evidence of short-term clinical benefit. On the long-term or durability side, there is still a skepticism for approval. FDA has signaled a willingness to approve with a commitment by Chelsea to conduct a longer-term post-marketing study. Chelsea has countered with a study which will enroll 450 NOH patients and assess a dizziness reduction endpoint. Study 401 will evaluate the clinical efficacy and safety of Northera versus placebo over a 17 week (maximum) treatment period consisting of an initial, open-label dose titration (up to 2 weeks), followed by a washout period (up to 3 weeks), followed by a 12 week treatment period on a stable dose. The primary outcome measure of the study is to evaluate the duration of clinical benefit of Northera. The FDA's Cardiovascular and Renal Products Committee will be the one again reviewing the drug as with the 306B study.

All or nothing for Chelsea

The company projects the revenue estimate for Northera to be between $300-$375 million per year for the first five years of the product launch. Northera is pretty much the biggest cookie in the cookie jar for Chelsea Therapeutics as the company had cut back R&D spending and staff for its rheumatoid arthritis drug upon the initial rejection of Northera. So the January FDA decision could be a company make it or break it event. One note to consider as guidance and a possible confidence factor is BAKER BROS ADVISORS, prominent in small cap biotech investment firms, recently increased their position in Chelsea by 1 million shares, perhaps indicating a positive outlook.

Chelsea current is trading at $4.28 with a $302 Million Market Cap. The January 14th FDA panel review should propel the stock and the company in one direction or the other.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.