Chelsea Therapeutics Shares Drop On Report: What You Need To Know

Today, Chelsea Therapeutics (CHTP) shares took a big hit on safety data that showed 3 deaths in the company phase clinical trial of Northera.

Biotech reporter Adam Feuerstein provided some insight on Chelsea Therapeutics stating that 55% of analysists polled still expect the FDA to approve Northera. The official FDA panel will convene Feb. 23 to review the Northera data.

Chief Executive Simon Pedder issued the following statement in a Chelsea press release;

In light of recent communications with FDA, including receipt of a briefing document for our upcoming advisory committee meeting, we wanted to take this opportunity to update our shareholders on several lines of inquiry that have emerged as significant components of the benefit-risk analysis of Northera," commented Dr. Pedder. "A number of these questions relate to previously discussed issues identified for our development program, namely the short duration of our clinical studies, the limited size of our study population given the orphan indication and the challenges in quantifying symptomatic and clinical benefit. FDA has, however, placed increased emphasis on safety data from our long-term extension program and the post-marketing surveillance program in Japan. We look forward to the opportunity to address these questions in depth during the advisory committee meeting and to continuing to work with FDA to address any additional questions they may have regarding Northera and our clinical program

Because Northera has orphan drug designation, it has been given a fast-track priority by the FDA. Because of this, shorter term data is looked at with more emphasis. These deaths appear to have occurred during the shorter term data phase.

The statement from Simon Pedder indicates that the FDA is looking at the long term data. This report shows a very short term result as again, may not be related to Northera at all when looking at in comparison, the longer term data.

As I indicated in my prior article on Chelsea, I feel the stock is a strong speculative buy. Please note the word "speculative," as it indicated and still indicates high risk. I maintain my price target of $10 because I feel the drug will be approved, and investigators noted only three deaths as being possibly related to Northera.

I urge investors to think calmly over this matter and make a well informed decision based on all the data. These kind of pps drop events are very typical of speculative bio-pharma.

The current pps of Chelsea as of 2/13/12, 3:25 Eastern, is $3.11

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.