2-Star Stocks Poised to Plunge: Chelsea Therapeutics?

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Based on the aggregated intelligence of 180,000-plus investors participating in Motley Fool CAPS, the Fool's free investing community, pharmaceutical company Chelsea Therapeutics (NAS: CHTP) has received a distressing two-star ranking.

With that in mind, let's take a closer look at Chelsea's business and see what CAPS investors are saying about the stock right now.

Chelseafacts

Headquarters (Founded)Charlotte, N.C. (2002)
Market Cap$215.9 million
IndustryBiotechnology
Trailing-12-Month EBITDA($50.5 million)
ManagementCEO Dr. Simon Pedder
CFO Nick Riehle
Return on Capital (Average, Past 3 Years)(93.6%)
Cash/Debt$57.6 million / $0
CompetitorsAbbott Labs
Amgen
Incyte

Sources: S&P Capital IQ and Motley Fool CAPS.

On CAPS, 12.5% of the 136 members who have rated Chelsea believe the stock will underperform the S&P 500 going forward.

Just a couple of days ago, one of those bears, All-Star zzlangerhans, tapped the stock as a particularly timely underperform pick:

Chelsea CEO Simon Pedder laid some serious crepe in an unusual press release ahead of the FDA Advisory Committee meeting for Northera. He referenced FDA briefing documents that apparently raised concerns about weakness in the design of the Northera phase III trials, as well as much more troubling "questions" regarding the role of Northera in several deaths which occurred during the studies. ...

It seems that Pedder was trying to protect himself and his company from accusations of concealing material information ahead of the FDA Ad Comm material event. Indeed, a large contingent of investors fled the stock, dropping the share price substantially. ...

I believe that the prudent souls who exited the stock will be proven correct when the FDA issues very negative briefing documents on February 21, two days in advance of the advisory committee meeting.

What do you think about Chelsea, or any other stock for that matter? If you want to retire rich, you need to protect your portfolio from any undue risk. Staying away from dangerous stocks is crucial to securing your financial future, and on Motley Fool CAPS, thousands of investors are working every day to flag them. CAPS is 100% free, so get started!

Want to see how well (or not so well) the stocks in this series are performing? Follow the newTrackPoisedToCAPS account.

At the time this article was published Fool contributor Brian Pacampara owns no position in any of the companies mentioned. The Motley Fool owns shares of Abbott. Motley Fool newsletter services have recommended buying shares of Abbott. Try any of our Foolish newsletter services free for 30 days.We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Fool's disclosure policy always gets a perfect score.

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