Chelsea Therapeutics International Ltd. (CHTP) Q4 Earnings Analysis

Chelsea Therapeutics

Wedbush Equity research analyst Liana Moussatos maintains an Outperform rating for Chelsea Therapeutics International Ltd. (NASDAQ:CHTP) as she delves into some attractive aspects about the company.

Chelsea Therapeutics’ 2013 Financials were in-line

Chelsea Therapeutics International Ltd. (NASDAQ:CHTP) reported Q4/FY 2013 EPS (loss) of $(0.07)/$(0.24) and ended 2013 with about $45.3 million in cash. We project runway into 2015.

With Northera’s recent approval, we reiterate our speculation that a partnership or acquisition of Chelsea Therapeutics International Ltd. (NASDAQ:CHTP) could be on the horizon. While we anticipate that the company will explore all strategic alternatives including a licensing deal or being acquired, we also expect them to prepare to launch Northera on their own. We estimate the company could launch Northera sometime in H2:14 following the build-out of a commercial infrastructure and manufacturing scale-up.

Although Management has consistently reiterated their dual strategy to pursue commercialization of Northera on their own vs. strategic alternatives for either a commercial partner or acquisition, we believe the lack of conference calls suggests the latter is most likely. We understand that the company is developing commercialization plans for Northera in the US; however, given that NOH is a rare disease (approximately 80,000 – 150,000 symptomatic NOH patients in the US) and is now approved, we believe it is attractive to multiple pharmaceutical companies looking to add to their salespeople’s’ bags. We conservatively project about $430 million in worldwide peak sales potential.

Chelsea Therapeutics’ valuation

We maintain our OUTPERFORM rating and are converting to an $8 twelvemonth price target for Chelsea Therapeutics International Ltd. (NASDAQ:CHTP). Our 12-month price target is calculated based on the sum-ofparts for each drug/indication using a 30% annual discount from our peak annual sales projections and 1-10x multiple, depending on stage of development to reflect risk, then projecting our current fair value into the future by 12 months.

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