Chelsea Therapuetics set to run higher in anticipation of upcoming FDA decision Print E-mail
By Patrick Crutcher   
Friday, 20 August 2010 11:27

As we told our subscribers early this morning, the call volume on the stock is way up- with about 14x the average daily volume of 15. As you know, high call volume is an indicator that many investors are looking for higher prices in the near future and that certainly applies to shares of Chelsea Therapuetics Inc (NASDAQ: CHTP), which have been been drifting higher over the past nine trading days gaining over 20%.

Note the Golden Cross which is about to be formed on the stock chart and look also at the key resistance that the stock must break just above the $4 mark. From a technical analysis standpoint, if this stock gets past the $4.40 mark, it could easily run up to $5 and beyond.

From a fundamental standpoint, the current run comes off news that the FDA is poised to pull ProAmitine (Midodrine) from the market due to Shire (SHPGY) not conducting post-approval studies to prove that the drug has a benefit. Shire confirmed they have elected to withdraw the product effective September 30, 2010.

The withdrawal of Shire’s drug would also stop all sales of any generic version. These generic companies include Mylan Pharmaceuticals (MYL), Impax Laboratories (IPXL), and Novartis (NVS) unit Sandoz, must stop selling their generic versions of Midodrine. About 100,000 U.S. patients filled prescriptions for brand or generic forms of ProAmatine in 2009, the FDA said. Why does this matter to CHTP? With all of the competition removed, CHTP’s lead drug, Northera, will have a substantially larger market to fill, if approved. Some analysts have projected the market size for their drug to be around $200-300M.

Investors are anxiously awaiting news from CHTP’s pivotal Phase 3 trial with results due in September for their lead drug, Northera (droxidopa), for the treatment of orthostatic hypotension. Study 301 was reviewed by the U.S. Food and Drug Administration (FDA) and awarded a Special Protocol Assessment (SPA) in February 2008. The FDA subsequently confirmed that the SPA remained in effect following the protocol amendments approved by the FDA late last year, after their Study 302 did not meet the primary endpoint, yet did very well in other endpoints.

CHTP’s preliminary analysis revealed that nearly every secondary symptomatic endpoint in the trial was either supportive or strongly supportive of Droxidopa's therapeutic benefit. Clinical and patient global assessments of severe orthostatic hypotension at end of study were also strongly in favor of Droxidopa. The FDA said the safety/efficacy data from this study will be considered to be a supportive part of future regulatory filings. (At least the trial was not done in vein.) In addition to the SPA, the FDA awarded CHTP Fast Track designation for its pivotal program in NOH. Fast Track designation can lead to a priority review, which is 6 months, not 10, and allows them to submit their NDA on a rolling basis.
With the changes in study design (primary endpoint and power) and FDA keeping the SPA, I think CHTP has increased the likelihood of a successful trial. The new OHQ composite score is a single endpoint that reflects the average of the composite orthostatic hypotension symptom assessment (OHSA) score and the composite orthostatic hypotension daily activities scale (OHDAS) score. This better reflects a patient’s condition, than just one item on the OHSA scale. They have also add 24 more patients to the study to increase the power to more than 80%. They also have an extension study (Study 303) which showed that prolonged treatment with Northera provides clinically meaningful and durable symptomatic improvements in patients with NOH, validating that the drug is safe and well tolerated throughout the extended dosing period. Additionally, based on Study 302, CHTP is leading a Phase IIIa in NOH in patients with Parkinson’s Disease based on their subgroup analysis.

CHTP has adequate cash to finish their pivotal trials in NOH and fund other Phase 2 trials using droxidopa (for use in Fybromyalgia, and Intradialytic Hypotension, Adult ADHD, and Chronic Fatigue), and CH-4501 (indicated for use in Rheumatoid Arthritis). Investors should read their August 2010 presentation for more information. CHTP will remain bullish going forward based on their robust pipeline and increased likelihood for success in their pivotal Phase 3 trial with results in September.

DISCLOSURE: No positions

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