Why Chelsea Therapeutics International Ltd. Shares Were Creamed

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Chelsea Therapeutics , a clinical-stage biopharmaceutical company, fell as much as 36% after briefing documents were posted on the Food and Drug Administration's website ahead of the Jan. 14 advisory panel meeting regarding Northera, a drug designed to treat neurogenic orthostatic hypotension (NOH).

So what: According to the briefing documents, the review of Northera could be complex in that it shows "strong evidence" that it delivers a short-term benefit to the patient within the first week. However, there's no concrete evidence that it has a long-term benefit to the patient, although the study data would suggest that it might. Investors are therefore clearly concerned that the FDA's advisory panel will not be in favor of approving Northera when it votes on Jan. 14.

Now what: The true concern I have with Chelsea Therapeutics isn't that its lead drug has only delivered concrete evidence of benefits in the short term -- it's that beyond Northera, which has already been rejected once, it only has three additional ongoing trials, two of which also include droxidopa (the scientific name for Northera). If Northera isn't successful on its second go-round, I believe investors are seriously going to question Chelsea's remaining pipeline. While I wouldn't suggest doing anything drastic like running for the hills, or playing ostrich, I would closely monitor Tuesday's vote for your next cue. If the FDA's panel votes against approval, Chelsea's long-term viability could very well come into question.

This is the top stock you should really be watching
There's a huge difference between a good stock, and a stock that can make you rich. The Motley Fool's chief investment officer has selected his No. 1 stock for 2014, and it's one of those stocks that could make you rich. You can find out which stock it is in the special free report: "The Motley Fool's Top Stock for 2014." Just click here to access the report and find out the name of this under-the-radar company.

The article Why Chelsea Therapeutics International Ltd. Shares Were Creamed originally appeared on Fool.com.

Fool contributor Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.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 Motley Fool has a disclosure policy.

Copyright © 1995 - 2014 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

Read Full Story