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Chelsea Therapeutics (CHTP) Has 20-100% Net Upside, Wedbush Said

January 15, 2014 8:38 AM EST Send to a Friend
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Wedbush analyst Liana Moussatos, Ph.D. reiterated an Outperform rating and $8 fair value target on Chelsea Therapeutics (NASDAQ: CHTP) after an FDA AdCom voted 16 to 1 in favor of approving Northera.

Despite the negative FDA tone in the briefing documents, the voting members favored approval with 16 voting yes, 1 voting no, 0 abstentions, and 0 non-votes," Moussatos highlights. For comparison, the previous FDA panel held in February 2012 also voted for approval with 7 voting yes, 4 voting no, 1 abstention, and 1 non-vote. They note that there were eight panel members who participated in both meetings, and of those, 3 maintained a yes, 3 switched from no to yes, 1 switched from abstain to yes, and 1 switched from non-vote to no.

"Our takeaway is that the members who switched to a positive vote believe that the '306b data are sufficiently supportive of the original ‘301 data and enough to demonstrate efficacy," Moussatos states. "The panel debated various aspects of the Northera clinical program as well as the disease in general, including study conduct and design, clinical meaningfulness of the primary endpoint, and durability of response. Our impression was that the panel came to appreciate the vagaries of clinical trials for neurological disorders—especially in orphan diseases like NOH. They also appreciated the lack of good alternative treatments. Quality of life improvements also influenced the panel, in our view. There were multiple patients and caregivers whose dramatic, life- altering change with treatment may have softened the nitpicking about apparent variable efficacy in the trials. Overall, we believe the panel members concluded that Chelsea had satisfied the FDA request for a short-term confirmatory study with the ‘306b trial. While durability of treatment remained a contentious issue, we believe the panel members ultimately believed that this can be studied in a post-approval setting. We do note that some members voted for approval under Subpart H with full approval contingent upon a successful long-term durability study. We also note that some members voted for approval with restrictions on duration of use."

The analyst sees about 20-100% initial net upside for CHTP near-term as investors acknowledge the decline in regulatory risk. "However, we acknowledge the initial stock reaction could be tempered as the dramatic decline in regulatory risk may be offset by fear that the FDA might still issue a second complete response letter (CRL) and require another trial to provide additional safety and durability data. Although the FDA does not have to agree with the panel’s recommendation (as seen the first time around), we believe the overwhelmingly positive vote this time may pressure the FDA to approve Northera. With the panel recommending approval, we estimate about a 65% chance of the approval on or by the February 14 th PDUFA deadline, but expect the stock to double or more if approved."

For an analyst ratings summary and ratings history on Chelsea Therapeutics click here. For more ratings news on Chelsea Therapeutics click here.

Shares of Chelsea Therapeutics are up 150% to $5.75 in early trade.




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