Chelsea Therapeutics International Ltd. (CHTP) Buyout?

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Liana Moussatos, Ph.D Richard Lau, CFA  of Wedbush on Chelsea Therapeutics International Ltd. (NASDAQ:CHTP) and the recent FDA news.

The FDA approved Northera for the treatment of symptomatic neurogenic orthostatic hypotension (NOH) under the accelerated approval program.

The Northera label is available on their website at 2/northera/.As expected, the label indicates that effectiveness beyond 2 weeks of treatment has not yet been demonstrated,and therefore, continued effectives should be assessed periodically. However, the label does not restrict duration of use, which we view as a positive for commercialization. The FDA’s accelerated approval program allows for conditional approval of a drug that fills a serious unmet medical need provided additional confirmatory studies are conducted. In Chelsea’s case, approval was based on short-term relief of dizziness that is reasonably likely to predict relief of dizziness during chronic treatment. To address long-term effectiveness, the company is planning a multi-center, placebo-controlled, randomized study with a three-month open label run-in phase followed by a 4 week randomized withdrawal phase that would enroll about 1,400 patients over a six-year period. The proposed trial design has been preliminarily agreed to by the FDA and would likely satisfy the accelerated approval requirement.

With approval, we speculate 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 Chelsea Therapeutics International Ltd. (NASDAQ:CHTP) could launch Northera sometime in H2:14 following the build-out of a commercial infrastructure and manufacturing scale-up. We conservatively project about $430 million in worldwide peak sales potential, but are currently revisiting our model assumptions. There are approximately 80,000 – 150,000 symptomatic NOH patients in the U.S.

We maintain our OUTPERFORM rating and $8 fair value. Our fair value for Chelsea Therapeutics International Ltd. (NASDAQ:CHTP) is calculated based on the sum-of-parts 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.

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