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The third Food and Drug Administration decision in three days is scheduled for tomorrow, when the agency is scheduled to decide on the fate of Chelsea Therapeutics' (Nasdaq: CHTP ) Northera, a treatment for neurogenic orthostatic hypotension, or NOH.
The advisory panel recommended approval of the drug by a margin of 7-4, with one panelist abstaining and another deciding not to vote at all. Despite the positive recommendation, clearly the panel wasn't gung-ho about approving the drug, which will weigh on the agency that was already questioning the safety profile before the meeting.
NOH causes patients to become lightheaded and even faint when standing because of a sudden decrease in blood pressure. The only approved drug for the indication, Shire Pharmaceuticals' (Nasdaq: SHPGY ) ProAmatine, doesn't appear to work that well, so it's not surprising doctors on the panel would want it as an option, despite potential safety and efficacy concerns.
The situation reminds me of InterMune's (Nasdaq: ITMN ) Esbriet, another orphan drug that the FDA panel seemed to recommend on hope rather than scientific rigor. The FDA went against its panel and turned down the drug.
I think the FDA is being a little ridiculous in worrying about Northera. It's been on the market in Japan for more than two decades. But based on what we've seen from the agency, I'm not expecting an approval tomorrow.
I wouldn't recommend shorting the shares either, though. Chelsea has a market cap of only $250 million, well below where it was before the advisory panel; clearly investors aren't very confident in approval. If the FDA issues a surprise endorsement, shares are going to take off like Larry King's high blood pressure. Who knows where they'll land, but multibagger returns aren't out of the question once Northera is on the market. Acorda Therapeutics (Nasdaq: ACOR ) , with one orphan drug that's expected to bring in less than $275 million this year, sports a $1 billion market cap.
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