The roller-coaster ride never ends for biotech investors.
Last week, we saw shares of Intercept Pharmaceuticals soar 516% on positive results for its experimental NASH drug. However, a press release pointing to some of the drug's side-effects caused shares to pull back this week. Conversely, shares of Chelsea Therapeutics (NASDAQ: CHTP) plummeted 30% on Friday, but are up a whopping 140% in after-hours trading. Chelsea investors seem set for a reversal of fortune -- but what happened, and how can things change so quickly in the biotech space?
A little backstory
The FDA rejected Chelsea Therapeutics' drug Northera back in 2012, but it's under review again for the treatment of certain patients suffering from neurogenic orthostatic hypotension -- a rare type of low blood pressure. In anticipation of today's advisory panel, briefing documents were released on Friday that questioned the drug's long-term efficacy. This sparked a sell-off and suggested that Northera might have few supporters at today's meeting. This didn't turn out to be the case; the panel voted overwhelmingly in favor (16 to 1) of approving the drug. The committee gave its thumbs-up, and Reuters reported that many of the panelists suggested Chelsea carry out additional trials to ensure the drug does have long-term benefits.
It's not over yet
The roller-coaster ride may not be over just yet for shareholders. The advisory committee voted in favor of Northera's approval, but the the vote was also positive just before the FDA rejected the drug in 2012. It's important for biotech investors to remember that the FDA has the final say in these matters and is expected to make its final decision on Feb. 14. This decision is hard to predict, and investors should tread cautiously. Even with the stock soaring after-hours, investors have endured a bumpy few years.
