Avoid This Biotech Stock: Chelsea Therapeutics International Ltd. (CHTP)

Chelsea Therapeutics ReorganizationEditor’s note: This article is a stock pitch made by a member on CAPS, The Motley Fool’s free investing community. The pitch is published unedited and is the opinion of the CAPS member whose pitch it is, in this case: zzlangerhans.

Each week, I cull a top stock idea from the pitches made on CAPS, the Motley Fool’s 180,000-member free investing community. Want your idea considered for this series? Make a compelling pitch on CAPS with a minimum length of 400 words. Want to follow the weekly picks? Follow me on Facebook or Twitter.

Company Chelsea Therapeutics International Ltd. (NASDAQ:CHTP)
Star Rating (out of 5) *
Industry Biotechnology
Market Cap $128 million

Chelsea Therapeutics International Ltd. (NASDAQ:CHTP) Underperform Pick

Submitted By zzlangerhans
Member Rating 99.56
Submitted On 3/12/2013
Stock Price At Underperform Recommendation $2.00

Sources: S&P Capital IQ, Yahoo! Finance, and Motley Fool CAPS.

This Week’s Pitch:

Chelsea Therapeutics International Ltd. (NASDAQ:CHTP) is definitely the soapiest soap opera of biopharma. It’s virtually impossible to keep track of the multiple trials, the changing endpoints mid-trial, the dubious and equivocal trial results, the company’s nebulous plans for regulatory submissions, and the company’s confusing descriptions of FDA communications regarding their trials and regulatory submissions. The only consistent outcome is that the binary catalysts constantly seem to find the market wrongfooted.

I think once again the market is taking Chelsea Therapeutics International Ltd. (NASDAQ:CHTP) in the wrong direction, enthusiastically bidding up the share price on news that the FDA has reversed itself and stated that study 306B has the potential to serve as the basis for a Northera NDA resubmission. Of course, there’s a big difference between serving as the basis for an NDA submission and the basis for an NDA approval. And the market seems to have forgotten that the 306B topline data was actually pretty bad, with no evidence of statistically significant benefit beyond the first week of treatment.

…The FDA has shocked me before, for example by reversing themselves and approving Vanda (NASDAQ:VNDA)’s Fanapt a few years ago. But in general I find it wiser to go with the FDA’s usual approach to this type of weak NDA application rather than to bet on the black swan.

The article Avoid This Biotech Stock originally appeared on Fool.com and is written by Dan Dzombak.

Fool contributor Dan Dzombak can be found on Twitter @DanDzombak or on his Facebook page, DanDzombak. The Motley Fool has no position in any of the stocks mentioned. 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 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

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