Investors Faint From FDA Rejection

Investors' blood pressure might be on the rise today, but it isn't because they're taking Chelsea Therapeutics' (Nasdaq: CHTP  ) Northera. Yesterday, the Food and Drug Administration rejected the drug for treating neurogenic orthostatic hypotension, a disease characterized by lightheadedness and even fainting when standing because of a sudden decrease in blood pressure.

Wonder how many investors fainted when they woke up to find their shares are down 27%?

As I said in my preview of the FDA decision, the roadmap to the Northera FDA decision paralleled InterMune's (Nasdaq: ITMN  ) Esbriet; the FDA panel seemed to shrug off issues with the clinical trials because they were orphan drugs, giving both a positive recommendation. But the agency ignored the advice and turned down the drugs.

Where the roadmaps diverge is the post-rejection requirements. InterMune had to run another long trial with a one-year efficacy endpoint. And the trial took a while to get started as InterMune waited for a decision in Europe. If the drug had been denied there, the trial needed to be designed to satisfy regulatory authorities on both sides of the pond.

For Northera, on the other hand, the FDA just wants data on the durability of Northera's efficacy over two to three months. Chelsea is currently running a trial with a 10-week efficacy endpoint, which falls into that two- to three-month requirement. The company isn't sure whether that trial will satisfy the FDA, though; a new trial could be required.

In addition to the efficacy requirement, the FDA said a black-box warning would probably be required if Northera is approved. Considering the limited options for patients with NOH -- Shire Pharmaceuticals' (Nasdaq: SHPGY  ) ProAmatine doesn't appear to work that well -- I don't see this as a major stumbling block. And the FDA said it might be able to get the warning removed with data that showed a lack of severe hypertension in patients taking Northera.

Today's knockdown certainly seems like a buying opportunity for Chlesea. There's some risk that a new trial won't work -- especially given the complexity with finding the right clinical endpoint -- but based on data from the previous trial and its use in Japan, it seems pretty clear Northera works. Just keep in mind that, like MAP Pharmaceuticals (Nasdaq: MAPP  ) , which saw its drug get rejected earlier this week, there's still plenty of time to get in before the next FDA decision.

While you're waiting, take a look at what Fool analysts believe is the next rule-breaking multibagger. Get the free report.

Fool contributor Brian Orelli holds no position in any company mentioned. Check out his holdings and a short bio. The Motley Fool has a disclosure policy. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.


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